Gail Klintworth is the Group Customer Director and Responsible Business Lead at Old Mutual plc. In this role, Gail helps the business units deliver on their customer, brand and digital growth strategies and the critical strategic objective of becoming “the recognised financial services leader in Responsible Business.” Gail joined Old Mutual from Unilever, where most recently she was its Chief Sustainability Officer. In prior roles, Gail led Unilever’s global Savoury category, a number of global brands and was CEO of Unilever’s business in South Africa. GlobeScan Director Caroline Holme recently interviewed Gail to gain insight on the value Old Mutual puts on stakeholder intelligence to help build recognized leadership in an uncertain world.
If we think about the sector covering banking, investment, and insurance more broadly, the first big opportunity is development in Africa and emerging markets. You still have a lot of people that are unbanked, that are in an informal economy, that do not have the ability to pool their money and benefit from pooled money. It is a form of subsistence living – get the money and spend it. They haven’t benefited at all from a financial system, nor do they have any insurance – they are outside of the system.
Now there is the big question about what comes first – does insurance and a financial system come first or does economic development come first? In fact, there is a lot of research that shows that if you formalise the financial services a little more in a lot of developing countries it drives economic development. People feel a little bit more secure, and therefore feel like they can invest in something. They are able to take slightly greater risks because quite frankly if the crop fails, then they will still get their money back.
Economic inclusion is a huge opportunity. In many parts of Africa, there is still 70%–80% of the population unbanked. The penetration of personal insurance is only 2% in most countries. This provides an enormous opportunity not only to grow the business, but to make a positive difference. Paradoxically, 64% of people in the UK do not have enough money to retire. 70% of people in the US don’t feel secure about their retirement. These are very similar sorts of issues, albeit at a different level – the under-banked, under-insured, and under-secured. In both of these instances, the big lever in terms of driving social equity and inclusion is education. It is fascinating how the very simple things – don’t spend more than you earn, put a little bit away for a rainy day – is just not part of how we live our lives. Sometimes because we just don’t have enough. Sometimes because we just can’t control ourselves.
The financial services sector has a big role to play. We know what is necessary and we know what works. Of course there are the Regulators, the Financial Conduct Authorities, and Governments, however, given what else is happening in the world, I don’t know if they are going to make that their priority. On the investment side, financial services actually control where capital goes, and by extension what can grow and what can’t grow. Whether we are talking about lack of housing, carbon-intensive industries that are contributing to climate change, or trade infrastructure, financial services have a critical role to play in helping to facilitate what I call regenerative growth. The opportunities are huge if you really get your head around it, especially in Africa. Of the 94 billion dollars of infrastructure investment needed over the next ten years, only half is secured within governments.
First of all, we need to think about the longer term rather than how much money do we make today. We are helping to shift what in many cases can be seen as a destructive economic cycle, where all of us have contributed to a number of developments that aren’t necessarily good for broader society. This takes time. Focusing capital for the long term is critical. If you have a look at how the markets work, not even the people within investment or investor groupings are making the decisions – machines are making the decisions about where money goes. This doesn’t necessarily favour taking a long-term view. That is one barrier.
Another barrier is risk. Working with communities to create community banking doesn’t necessarily make for easy risk management, and it is probably a little more uncertain than some of the models we run elsewhere. How we are able to adjust our risk appetite to handle things like that is an issue. In addition, the regulation or governance systems in these countries are not necessarily as sound as we would all like.
A third barrier is navigating through the complexity of maintaining one’s corporate reputation while taking on new opportunities. The lack of trust in financial services resulted from a number of really silly decisions that were made. This lack of trust has actually made the financial sector so risk-averse that it is beginning to hamper our contribution to socioeconomic development.
What I always find fascinating is to think about why financial services exist – to enable people or companies to pool money, to lessen their risk and benefit from the pooled funds. All financial services are supposed to do is look after that money and either invest it or deploy it in a way that is beneficial to all. Have financial services in general forgotten that? Our role is to make the economy work on behalf of people and institutions. I often ask myself how it is possible that behaviours and actions and a general lack of awareness resulted in the financial crisis. Some of it is greed. Some of it is just lack of decent governance mechanisms. A lot of it feels like culturally, we have become so distant from what we are there for in the first place.
I think a reconnection with what we are about – connecting actuaries, connecting investors with real people. Physically going out and experiencing the impact of what we are doing. That is one tiny way. Clearly there is also the need for regulation. In some ways regulation, such as the Financial Conduct Authority’s “Treating Customers Fairly,” was a good response to the fallout. However, it can become overly limiting to what companies can do. It also doesn’t necessarily serve the customer well.
It is good to lead. If you lead with the customers in mind then we all get to a good place. In my previous life [at Unilever] we partnered with the public sector and civil societies to address issues like hygiene, sanitation, etc. Financial services have been quite slow to do that, and I think it is a great opportunity and a necessity. The issues are so big – 4% of the world’s population owns 80% of the wealth. It can continue but it is going to have great fallout. The fact that global CO2 concentrations have just passed 400 parts per million is causing all sorts of issues, so being part of the solution is critical. Taking sides doesn’t help.
There are a couple of things. Collaborative approaches to problem solving within the industry is critical. This is much more developed with packaged goods or agricultural industries. In financial services it seems to be less well developed and I think there is a great opportunity here. For example, the insurance industry has just initiated a micro-insurance coalition called Blue Marble. Helping markets develop for micro-insurance is critical, and so we are working together to figure out what the best way is to introduce insurance into markets without any of us desperately wanting to make profit in the short term. In the longer term it will benefit society and the market will develop. Another example is The Equator Principles – a risk management framework for determining, assessing, and managing environmental and social risk in projects.
The second opportunity is in engaging with stakeholders, whether it be regulators, competitors etc. Dialoguing around what a solution could be to a common problem or a common opportunity – it doesn’t feel easy to do that. Everyone has to be extremely careful about what they are saying, and that is not conducive to joint problem solving. It is a punitive conversation very often rather than problem solving. I think that is something that we should explore. Also very interesting is how we engage with one another, with any stakeholders actually. Whether it is civil society or regulation, are we engaging to explore and understand different perspectives, or are we engaging to confirm our own view?
I think we need to accept that we deserve a lot of the mistrust. It cannot be right that decisions and choices have been made that fundamentally harm the trust that people have placed in the sector. The industry has shown remorse, but then there is another scandal. How many times can you say you’re sorry? I think there needs to be a real deep acknowledgement that things are not right. An approach has to be to put in place to really earn people’s trust. You’ve got to change whole systems, change whole cultures to embrace what in many cases is a new way of behaving. Whether it is implementing the right kind of governance, whether it is treating customers fairly, it is a long and hard road ahead I think, but we have to do it and we have to do it openly and willingly. We seem very reluctant to be transparent – as soon as you are transparent you get slapped with a big fat fine. What I would love to see is for us to be able to be a lot more self-reflective in our own businesses, a lot more transparent about what we are doing to fix it, a lot more open with one another, and then to be able to engage with customers and regulators and one another around what is the best way forward.
A lot is happening. If you have a look at the sorts of things that this industry is mistrusted for – hidden commissions, hidden banking charges – that all has to go and it is going. There is a lot of room to innovate. It would be much easier to innovate if you could have open conversations about what we are trying to do in the spirit of trust. Think about the packaged goods industry – it was possible to have conversations about what was the best way to address child mortality. Sometimes it is around putting in place the right primary health mechanism, but often it is about getting people to just wash their hands. The private sector has a critical role to play there, and so it was possible to have those conversations. I haven’t seen enough of those open conversations here. If we could have those conversations and talk about what would be best for all, that would enable more innovation and build trust.
Like many other financial services businesses, Old Mutual is on a journey. Financial services generally – and I know this is a big generalisation – lost sight of what it was there for. What it became was a product-push business, through distribution, as opposed to a customer-responsive business. So we are on a journey to make sure that we are completely customer-led, have in place the right kind of governance mechanisms and investment policies, and keep policy holder funds separate, etc. The sort of model that we are putting in place is to build a foundation of trust.
So what are the things that we have to do? Risk and capital management, culture transformation, treating customers fairly, and governance. That is the basis. If we have that in place, then a slip-up hopefully will not erode trust in the industry and in our company. Then we need to look at the material impact that we can have. Material impact needs to create financial wellbeing for customers and responsible investment.
Old Mutual is particularly well placed. It is a company with very deep roots in South Africa and Africa. It has a very strong trust reputation. It hasn’t lost touch with that connection. We have amazing models of providing financial education that is completely not linked to selling any products – we are taking that and rolling that out quite quickly together with partners. I have been to tents in the middle of rural Kenya where you’ve got people that travelled for a day to come and sit in a tent to learn about how they might budget, how they might manage their financial affairs, how they can make sure that they have funds to educate their children. It really is quite meaningful. That is what we are doing on the financial wellbeing side. In the UK for example, we are very keen to introduce the concept of making a prosperity plan, with life goals, available to very many without any product commitment required, no selling.
On the responsible investment side we are already, in Africa certainly, one of the largest private investors in infrastructure, renewable energy, etc. We will keep driving that. Why? Because we have 350 billion dollars of funds under management and how one deploys that is really critical in making sure you are not only looking after your customers’ interests. One of the myths that we desperately want to break is that responsible investment means reduced returns and that is just not true. In Africa, our Futuregrowth fund empower investors to vote with their feet by investing only in companies with high sustainability profiles, without compromising on investment returns. We also have launched a fund that tracks the MSCI World ESG Index, and it too provides superior returns and good impact. There is a lot that can be done. That is what we want to do through Old Mutual.
It is a journey because generally in financial services, and again it is a generalisation, the sort of model around responsible business that is still broadly understood is we do our business and then we give money to charity. There is always room for philanthropy but that is not what is going to drive the rump of this thing. We have to move from “I do my business and then I appease my conscience” to “We are driving our core business to make a difference.”
I have had a good look around, and I can’t call out any major global institutions. I think everyone is trying to do their bit. You have development banks that are doing some good things but then they are not necessarily in the commercial space. You’ve got big financial institutions like Deutsche Bank who have invested in women entrepreneurs, like Goldman Sachs’ 10,000 Women initiative. Those are all great but I haven’t yet seen anything that is really trying to go mainstream.
In more local financial institutions, I see more of that. For example, we have a venture with Kotak Mahindra in India. That is a business that was conceived of to have a positive impact and they are doing some good things. We own something called the Faulu Community Bank in Kenya. They are doing some great stuff. Everyone is doing pockets.
What I’d love to see is what we managed to do in the packaged goods industry where the top food companies or the top personal care companies identified their most material impacts through their core business and then started making commitments together about what they could do. I was privileged to chair the sustainability group for the Consumer Goods Forum. We made a commitment to remove deforestation from our supply chains by 2020 and that was a huge commitment. Can you imagine how on earth you make sure that the palm that is going into your margarine or body lotion is secure? Through a chain that isn’t yet segregated and isn’t yet sustainable? But we committed to it. Financial services are not yet there. We have the Equator Principles that people could sign up to. There is UN Principles for Responsible Investment. Yes, people have signed it, but it is not common place. I think we are at a slightly earlier stage.
My experience previously isn’t necessarily about standing up in big institutions and saying “follow me.” It is about individuals. I really do believe the saying that “Things don’t change, people do.” The shift that we’ve managed to get in other industries has been through courageous leaders. It hasn’t been through big institutions that sit down and decide we are going to do this.
It is all about Africa really. One of the reasons that I chose to join Old Mutual was because of my very strong belief that at the stage of development Africa is at now, we have an opportunity to contribute to doing it right. Doing it right in terms of addressing social development but also doing it right in making sure that economic development isn’t at the expense of the environment or people. In other parts of the world we are now trying to fix the mess we made. In Africa we have an opportunity to do it right from the beginning. Of course there are issues, of governments, there are issues of war, but if you have a look at how Africa is growing, it is well ahead in terms of percentage growth than many other countries and economies. It has a high youth population; the middle class is growing faster than many other continents. There is a great amount of hope actually, and a huge need for infrastructure development, and the formalising of economies, etc. The potential is huge, but doing it the right way is going to be critical. This is why I see the financial services industry playing a positive role in socioeconomic and environmental development across Africa, so that we don’t end up with the problems we have in the West, and parts of the East. And there are forums that are enabling that. The World Economic Forum and initiatives within that, and the Grow Africa initiative, etc. It does feel often though, that a lot of it is driven from outside of Africa and that is not helpful. We need more collaboration within Africa and a lot of the global financial institutions are not from Africa. As Old Mutual Group is a South Africa/UK firm, we are well placed to help.
What we have said is that we want to be the Africa financial services champion, and we want to be recognised as responsible business leaders in financial services. In order to do that we need to put our customer needs first and make sure that we help to develop services in the right way in key countries, and you can’t do that on your own. We are talking with NGOs who are working on the ground and we are talking with governments about what is the best way to do this. What role can we play? It is not about us going and saying “We are going to do this, who is going to join us?” It is us starting a dialogue around the kinds of partnerships that will have the most impact. Our big ambition is really about enabling positive futures. Old Mutual is 170 years old. That is a really old company. For 170 years, it has played and still plays a critical role in helping people with financial security and wellbeing. I would love it if we could do the same in the rest of Africa. We currently have 17 million customers. There are a billion people in Africa. Doing it in such a way that everyone benefits – but particularly the customer benefits most. That is the dream and you can’t do it on your own. The way we developed the business was through partnerships – partnerships with unions, government, and more recently with black economic empowerment partners. With our two significant partnerships in South Africa, the investments have just matured and both partners have chosen to stay in. We estimate about R7.8 billion worth of benefit has been returned to the trusts and what we’ve agreed going forward is that we are all going to stay in and contribute to more development. That vision is what helps you build a company for 170 years. Hopefully it is going to be around for a thousand years and many more people will benefit.