How technology can help create more sustainable banks
Today, the stark reality of climate change and the need to act now can no longer be ignored. Issues that affect us all and that have been raising increased concern among the scientific community, with the latest do IPCC (Intergovernmental Panel on Climate Change) report stating that “scientists are observing changes in the Earth’s climate in every region and across the whole climate system”. According to this study, temperatures on earth keep rising as a direct result of the growing emissions of greenhouse gases that result from human activities, that have been “responsible for approximately 1.1ºC of warming since 1850-1900” and that in the next 20 years might cause the “global temperature to reach or exceed 1.5ºC of warming” – a seemingly insignificant rise, that may yet turn out to be truly catastrophic for the planet.
Not all is bad news, though, as it appears that climate change is finally becoming a priority for governments, businesses and societies all around the world. The pressure from society to address this issue is rising, and some countries and organisations have already pledged to become carbon neutral by 2050. A commitment that sends a strong message to the rest of the world: there’s an urgency to act now. As Bill Gates states in his book “How to Avoid a Climate Disaster”, we don’t yet have all the necessary tools, but, still, we already have some at our disposal that we can use to reduce emissions and to start to draw a path towards carbon neutrality.
In this context, technology is a key element to help reach sustainability in all sectors of society, and, thankfully, it’s at the disposal of everyone. Banking and financial institutions are also included in this reality. So, how can technology help banks become sustainable?
Sustainable Banking: technology as a driver of change.
Financial institutions are embedded in the lives of people all over the world. We all need them to survive in the modern economy, and banks are an essential part of the economic fabric of our societies. They have a direct impact on the lives of different communities; therefore, they have the responsibility to be a driving force for positive change in the regions they operate in. Recently, due to the COVID-19 pandemic, we have seen banks step up to this responsibility through the mortgage relief and other measures. A positive trend, that needs to be kept and met by an increasing promotion of change in the way we deal with the climate crisis. The pressure for banks to act is coming from many different stakeholders such as regulators, employees and even from customers. As the general public becomes even more aware of the urgency to deal with the climate crisis, they feel empowered to change their behaviours and start expecting that same change from the different companies they do business with. Thus, technology and digital tools can, in this sense, become real drivers of change in two ways: by helping organisations reduce their emissions and achieve carbon neutrality, and by integrating digital tools for consumers to make an individual contribution towards that same goal.
According to Meniga’s European Carbon Survey 2021, 68% of consumers are interested in green financial products, while 63% want their bank to help them offset their carbon footprint.
Consumer demand for alternative services and products is increasing, and consumers are keen on being part of the change. Therefore, banks are in a privileged position to offer consumers the tools they need to take part in the environmental challenges we now face. How? On the one hand, by helping consumers to become aware of the impact their purchases have on the environment and, on the other, by giving them the necessary digital tools to reduce said impact. There are already several solutions in the market that allow banks to address the growing needs of consumers in this regard, both to increase awareness and also to help them take action. A carbon footprint calculator, for instance, helps consumers understand how their daily activities and different purchases impact the environment – the carbon footprint estimates the total emissions of greenhouse gases resultant of the products we purchase or the daily decisions we make (our transportation mode, the food we buy, the travels we do, etc.).
By integrating such a tool on the customer’s digital banking journeys, banks will not only be able to help consumers understand how much of an impact they have on the total number of emissions of greenhouse gases, but also offer them alternatives so they can reduce that impact and make the transition from “being aware of the problem” to “becoming part of the solution”. That can be achieved by offering green financial products (such as green car loans, green savings, paperless statements, etc.), setting up offsetting schemes or offering a clear incentive to drive behavioural change — banks such as Barclays and Swedbank, for example, are already offering green loan options. In the case of Commerzbank, they were responsible for the launch of the “mountain forest project”: for every switch to paperless bank statements, one square meter of forest in planted in Germany. Another concrete example is Nordea, that gives consumers the chance to track their CO2 impact through a carbon footprint calculator on their mobile app.
On the other hand, different organisations also have a big role in these matters: several major companies such as Microsoft, Coca- Cola, Unilever, Best Buy, Siemens, and numerous cloud providers, just to name a few examples, have pledged to achieve carbon neutrality by 2030- 2040. Technologies such as the cloud are instrumental for companies to go green, since, according to Accenture, the migration to the public cloud “can achieve significant carbon reduction in the form of a 5.9% decrease in total IT emissions”. There are already various tools that can help organisations understand and reduce their environmental impact, such as Microsoft’s Sustainability Calculator. With tools such as these, organisations can achieve climate-related goals, reduce carbon footprint, and increase emissions transparency.
In conclusion, there is already an increasing effort on the part of banks to seek sustainability and to include environmental, social and governance (ESG) criteria in their business decisions. Nonetheless, in order for this effort to evolve from its initial good intentions, there must be a continuous investment and reinforcement of this sustainability journey, through defined and transparent strategies and through the development of innovative services and products that result in positive competitive edges and in the widespread adoption of these alternatives across different customer segments and other industries. All this, so that Banks can take a decisive and concrete stand on the climate crisis, in order for them to become leaders in driving this movement forward. Because, ultimately, customers will reward banks that take that leadership stance on climate issues.
Reach out to us and explore how you can use technology to unlock your carbon zero future and to take the lead on becoming a sustainable bank.
Sérgio Viana
Partner & Digital Xperience Lead at Xpand IT