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Upscaling sustainability in banking

May 17, 2021

The financial sector has both the unique opportunity and a responsibility to help us become a more sustainable global society. And, much of the banking industry is starting to accept this role – 206 banks, one-third of the global banking industry, have already signed up to the Principles of Responsible Banking. It’s a framework of the UNEP Finance Initiative for ensuring that the signatory banks align with the Sustainable Development Goals (drafted in 2015 by the United Nations General Assembly and intended to be achieved by 2030) and the Paris Climate Agreement.

But it’s not as simple as just defunding fossil fuels. A carefully managed transition is needed to prevent millions of job losses and massive economic impact worldwide. The primary opportunity to drive change for banks comes in advising clients, us, everyone, on our own transitions to sustainability. And, if we assume that banks can support such a transition (not only environmental but also social), then the field of business opportunities becomes much broader.

The billion-dollar question – is sustainability profitable in banking?

Sustainability in all sectors is quickly moving from a “nice to have” to a “must have” due to rapidly growing customer awareness. Increasingly, corporate entities are feeling pressure from their own clients to become more sustainable and those organizations that do not adopt sustainability whole-heartedly risk losing clients, talent, and market share.

If you think about what’s happening in other sectors: sustainability has been creating growth for more than a decade: hybrid cars, organic food, and sustainable clothing lines are but three examples. A recent survey by the Capgemini Research Institute revealed that 79% of consumers are changing their purchase preferences based on sustainability, and companies are reacting by creating new products and models that have paid off. In fact, the same survey substantiates this – it found that 63% of executives say that sustainability initiatives have helped boost revenues.

Two big reasons for the continuing uncertainty in financial services are the varying levels of maturity across geographies and types of activities; and that the full range of products and services, and the level of advisory that will bring them to clients, is still under construction. But there’s an incredible chance for banks to act as the catalyst in the world’s journey to sustainability and doing so be right on top of the many new investment opportunities of an ever-widening and burgeoning field of business. The first banks that design a fully consistent customer experience, with products, services, and advisory, around sustainability, will stand out and reap the benefits.

The shining lights of sustainability in banking

Although sustainability is a long way from being ubiquitous in the industry and no bank can yet claim to be 100% sustainable, there are more and more “green stars” in banking. One constellation of these can be found in Germany, a particularly well-developed geography in terms of sustainable banking.

The German Fair Finance Guide, in its fifth assessment in 2020, rated GLS Bank (95%), EthikBank (94%), and Triodos (88%), as the most sustainable, the latter of which has invested more than EUR6 billion in projects that benefit the environment and society and has over 700,000 customers worldwide. The guide also found banks’ commitments in the field of climate protection in 2020 (+12%) had particularly improved, with an impact on the oil, gas, and energy production sectors.

All banks will have to adapt but many struggle with determining exactly where to focus their efforts. And it goes beyond simple “greenwashing” – adopting a façade of a handful of initiatives to give the outward appearance of a sustainable enterprise, but many banks struggle with determining exactly where to focus their efforts.

How can banks measure the impact of their initiatives?

Without any global, consistent, relevant, and reliable measurement system, it’s difficult to evaluate the impact and compare the efficiency of actions. How can we distinguish the banks who play the real supporting role in the transition from the “greenwashers”? This is why it’s so important for banks to work with regulators and states who too have a big role to play by creating the framework and governance to facilitate the transition.

For the global economy to be transformed into a more sustainable one, huge investment is required, not only in sustainability initiatives, such as renewable energy sources, but in next-generation, data-driven capabilities and expertise to precisely measure how effective such initiatives are. A huge amount of data will be coming from the end clients that the banks will be targeting with their sustainability initiatives – we see now how big the challenge can be. Banks must start exploring this area right now, be pragmatic, and improve with time and maturity.

Innovating to enable a more sustainable future

Setting out

For banks, sustainability is a transformation as big as digital or data. The good news is that they can benefit from the lessons they have already acquired in these areas. But the challenge remains the same: define the vision; to infuse sustainability at every level of the strategy and the organization, don’t isolate the topic from any other.

Even with a well-defined sustainability roadmap in place, and potential partners and ecosystems identified, if banks don’t fully engage all stakeholders from the outset, there is little chance of success – the sustainability agenda must be elevated to CEO-level and board-level, and employees engaged by building awareness and providing training. All of this will require the rethinking of roles, responsibilities, and governance.

New products and services

The transition to a more sustainable organization will create a huge impetus for innovation. New sustainable banking and investing products and services, such as carbon-neutral banking with debit cards that allow users to measure their carbon footprint from every purchase, can capture new business. Initiatives such as these improve brand perception and lead to winning more customers. Innovation won’t come from the banks alone, but from the ability to innovate within a wider ecosystem. This is a brand-new way of thinking about products and services.

Data and measurement  

Although the scientific community has arrived at concrete ways to compare sustainability between countries, business-level comparisons are still tricky. This is why it’s so important for banks to embrace data and the right reporting frameworks to chart their progress against clear metrics – data strategy, data quality, connection with external data with the right architecture to support this, projection, and governance are key to integrate ESG criteria into decision chains. Banks should not delay in making significant investments in this field while leveraging their finance and risks data.

Banks can no longer afford to “wait and see” and ignore sustainability

Regulations and mounting customer expectations mean that banks cannot delay in taking immediate steps to suffuse sustainability into their proposition, their culture, their value chain, and their decision-making process. Laggards will suffer not only regulatory scrutiny and public repudiation, but also restricted growth. However, the banks that innovate and successfully move from “niche positioning” to “sustainability at scale” by adopting a proactive approach now will not only be winning new customers; they will be playing a leading role in the fight for our planet and our future.


Noemie Lauer
Noemie Lauer Vice President – Capgemini Invent