Jeff Davies: “We’ve got clarity on what it looks like to be doing the right thing.”

Fairer Future

5 min read

Jeff Davies is Group CFO at Legal & General. Previously, he was a senior partner at EY and held a series of senior actuarial positions at Swiss Re Life & Health. Here, he shares how the CFO’s role as arbiter of the numbers can be leveraged to support sustainability, and the importance of prioritising diversity to contribute to a fairer future.

How has the role of the CFO changed?

In all industries, but in particular in financial services, the CFO role has changed significantly. It’s become more about execution and change management, and its changing in relation to our need to report on broader things beyond financials. As the CFO, while in theory every business case goes by you and you could say no, in reality you’re there to facilitate and make sure we’re executing appropriately across the organisation and using best practice everywhere. It partly depends on whether there's a COO in the business, but in my case, because I have IT, tech and digital in my remit, it means I’m involved in nearly all change and transformation.

We’re having to report on broader things now, and so the CFO is naturally involved in those – everything from gender pay gap to sustainability reporting. A lot of CFOs aren’t just reporting those numbers but they’re recognising more and more that it’s their remit – not just to make sure the numbers are accurate, or help decide what the target should be, but also in asking: how are we going to achieve those targets and help the company to get there?

How do you use non-financial metrics like sustainability to inform leadership decisions at Legal and General?

A significant change has been made by the increasing amount of sustainability and climate reporting. We’ve used these measures to inform our decisions for a while, but we’ve now formalised this into a framework of governance and committee approvals, to keep sustainability front-of-mind when it comes to making decisions.

For instance, we’ve funded rolling stock companies for years – but we’ve said we won’t now unless at least 80% is electric. Similarly, if we are investing in construction then we need to know and be convinced by the green credentials of the development.

Another example would be that every direct investment we make into the market comes up to me and the CEO, and quite often we will come together with those from other divisions and ask ourselves: how is this investment aligned with our pledges? Is this the right way to spend? If it isn’t, we don’t proceed. So, this is one area where we’re very active and engaged as a management team, and creating a structural approach has helped us to embed it.

What is uniquely within the gift of the CFO?

As the CFO, you don't just get a budget and sign it off, you're heavily involved to make sure that they're aligned with everything we stand for and how we want to operate.

In many organisations, the CFO is perceived by others as the ultimate keeper and arbiter of the numbers – and this provides a real opportunity. With their finance function, the CFO oversees the organisation’s people who are the most essentially data-driven and can bring dispassionate rigour to the data they collect. I think this creates an opportunity to embed that level of rigour right into sustainability, and bring reporting there under their remit. In doing so, you underline the business’ commitment to its sustainability goals and ensure that sustainability reporting goes through a process of rigour that makes it more useful and actionable for the business.

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How do you go about empowering people and bringing them along the same journey?

I think we’ve got clarity on what it looks like to be doing the right thing. A lot of people might say that in a heavily regulated industry like ours, you do the right thing by controlling everything; I don’t think that’s strictly true. I think that by living our values: “Being purposeful, being straightforward, and collaborating”, we show by example what we think is the right thing to do. Having set this example, we trust our staff to follow it and make the right decisions for themselves. I think a lot of this also comes down to having regular conversations and the fact that we are very open-door, and aren’t hierarchical.

One of our divisional CEOs would say that you’ve got to bring some of that ‘tech’ mentality around testing things out and failing fast – but you’ve got to do it in a measured and responsible way. Given the great scale of complexity facing CFOs today, it is more important than ever that they are able to communicate crisply the most salient issues on their mind. There is a risk that organisations simply do nothing because of the complexity – they fail to get to the crux of issues and spend too much time on things that won’t move the dial. You’ve got to try new things out and assess whether they are delivering – and adjust course accordingly if things aren’t going as you had expected.

What keeps you awake at night?

I worry about the impact of hybrid working on peoples’ work/life balance, and what it means for their wellbeing. It doesn’t mean that you shouldn’t expect performance and quality, but people need to understand that they can make time for themselves. It’s very difficult to really understand what some people are going through, but it’s easier to empathise with them and understand that flexibility can make a real difference to peoples’ lives. It has an impact on their finances, their stress, and of course their overall wellbeing.

As I see it, there’s absolutely no reason why someone can’t drop their kids off at school and come in to work afterwards – I'd rather have you focused and engaged than really stressed with your mind elsewhere. It’s so important to communicate with people what you need as an individual, and I think we’ve moved forward a bit – nobody’s going to come back complaining that they haven’t got a reply to a message they sent in the middle of the night.

Another major concern is the rising level of inequality in the UK. We know that diversity of thought and background in the workforce is beneficial and improves outcomes, but often organisations are hesitant to embrace it perhaps as they should. Not necessarily for any nefarious reasons, but with the mounting pressure on them to optimise margins and returns it can be seen as something of a disruption and a distraction. I think this misses the point. Diversity is an investment that you make in your people, and although it may be hard to prioritise, it’s something you simply must focus on. You need to make that change now to have the positive impact on the future that you want as a legacy.


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