How Sustainable IT can accelerate cloud transformation and enhance credibility for Financial Institutions

In the past years the global climate crisis has pushed the financial services industry to further accelerate the shift towards sustainable investing. This offering has grown into a multi-billion dollar market, providing Financial Institutions (FI) an important tool to steer and fund the fight against climate change.

Even though the importance of sustainable investing can’t be denied, there is a less popular aspect to sustainability in FIs that should not be overlooked: Sustainable IT. While we already introduced the concept and definition of Sustainable IT in our previous post, this article will provide you with some insights of how this plays out for FIs specifically.

IT Sustainability Strategy

Today IT contributes almost 4%^[1] of global greenhouse gas emission (compared to 2% in 2007^[2]) while data centers alone accounted for approximately 1% of global energy consumption in 2019^[3]. Although IT is such a significant contributor to the carbon footprint, only 23% of banks have a Sustainable IT strategy with well-defined goals and target timelines ^[4].

This lack of well-defined IT sustainability strategies for banks bears reputational risks that could potentially result in financial losses: an increasing number of clients expects their bank and insurance company to act more responsibly, both socially and environmentally. Urgency for FIs to respond to client’s demands is amplified by the prominence of sustainable investing offerings and the consequent expectation that FIs themselves act in accordance with such principles. This exposes FIs to a “credibility pitfall”, which can be overcome by defining clear Net Zero strategies.

Sustainability strategies also present a huge opportunity. Next to the obvious positive impact on climate change, FIs can build a strong brand image, improve employer attractiveness and realize cost savings on energy bills (between 20% and 40%^[5]) thanks to eco-designed products, less energy-consuming servers and a responsible IT policy.

Sustainable IT in Financial Services

The biggest lever that FIs can use to become more sustainable originates from IT operations, particularly data centers, by far the largest consumer of energy for FIs. To make use of this lever, FIs can adopt different IT strategies, one of which is the transition from on premises aging data centers to cloud platforms.

The following paragraphs will give you some more insights on this move to the cloud and the reasons why such a move makes sense from a sustainability perspective.

• Servers have often low utilization rates, which is problematic from an environmental perspective. Through virtualization, cloud enables the use of one hardware instance for different applications and thus makes it possible to run more applications with less hardware. In this way, the use of the cloud ensures that hardware is used with the greatest possible efficiency and ultimately also that less hardware is required overall. Finally, from the planet’s standpoint, the best server is the one that has never been produced.
• Cloud providers constantly invest in the latest hardware, which is often not the case with in-house hosting. Being technically up-to-date is not an end in itself but also goes hand in hand with a significant reduction in energy consumption. A lack of budget for hardware renewal should therefore not be an excuse for poor climate protection.
• Not only do the actual servers become increasingly more energy-efficient with technical progress, but so does the entire operation of data centers. In recent years, major advances have been observed in this area. Capgemini has been involved in multiple data center optimization projects and our experience has shown that the carbon impact of data centers can be reduced by up to one third.
• Cloud offers the advantage of financial sustainability. Instead of planning, building and operating an on-premise data hosting – often with excess capacity to accommodate anticipated growth – the cloud leads to costs solely depending on demand. Capgemini shows how a 19% cost saving is possible by switching to a green cloud architecture and framework^[6]. The funds released can be invested in other, more relevant, areas.

Pure outsourcing to external data centers is not the solution. The approach must rather be to choose a responsible cloud provider, calculate the provisional impact and jointly commit to reducing the carbon footprint. As a year-long cloud expert, Capgemini Invent supports your business to define a tailored cloud strategy and to accompany you on your way to a sustainable, cloud-based .

^[1] The Shift Project, “Lean ICT – Towards digital sobriety”, March 2019
^[2] https://www.cio.com/article/2437751/environmentally-sustainable-it-definition-and-solutions.html
^[3] IEA, “Global trends in internet traffic, data centre workloads and data centre energy use, 2010–2019,” June 2020.
^[4] https://preprod.wcms.capgemini.com/research/sustainable-it/
^[5] WeGreenIT study, WWF
^[6] https://preprod.wcms.capgemini.com/ch-en/2021/09/unser-klima-hat-ein-it-problem-doch-ist-der-helpdesk-ausreichend-besetzt/#_edn3

Thanks to the Co-Author David Schädler