How banking CEOs are focusing on sustainability, in 4 charts

Banking and financial markets CEOs are increasingly responding to external pressures and have begun recognizing the value of sustainability in their operations in order to drive business performance. However, they are not prioritizing sustainability as much as their peers in other industries. 

Many executives highlight the pressures coming from board members and investors, as well as customers, to speed up the process towards net zero operations. 

But the path to sustainability is not a clear one – many executives reported that there are still many uncertainties around what the bottom line benefits would be, making it hard to determine which strategy would be best, according to an IBM study.

The study interviewed over 3,000 Chief Executive Officers across 28 industries and 40 countries, and around 10% of the executives that participated in the survey were banking and financial markets (BFM) CEOs.

Interestingly, Chief Financial Officers are considered to play the most crucial role in executing sustainability initiatives in the banking and financial services sector – whereas the majority of CEOs across the board placed the burden on their Chief Operating Officers. 

Below we look at how priorities and challenges differ for BFM CEOs compared to the average results from executives from multiple industries. 

Delivering better customer experiences is the biggest priority for banking execs, similar to the study’s general results. BFM CEOs are also focusing on innovation and building stronger customer relationships. 

Sustainability seems to be a lower priority in the banking industry compared to the global average, where this issue ranked third in terms of highest priorities over the next 2-3 years. 

Moreover, environmental factors are not considered by BFM CEOs as one of the top 5 most important external forces in the next few years, as is the case for all the executives interviewed. 

Across the board, the top three external issues executives are focusing on are regulatory matters, technology and market factors. 

Historically, environmental factors were at the bottom of the priority list – IBM has been conducting this study since 2004, and this issue jumped 4 positions in just one year. This sudden rise was only matched by the surging interest in technology seen in 2004-2012. 

Sustainability is growing in importance in the eyes of executives, but they also ranked it as their greatest challenge ahead. 

Meanwhile, finance executives reported cyber risk to be the biggest hurdle over the next few years. Sustainability ranked third, just after regulatory issues.

So why are executives concerned about how to implement sustainability within their operations? The study found that CEOs, and BFM CEOs especially, are unclear about the financial benefits this would bring. 

It’s difficult to define the return on investment, as many executives noted that there’s also a big lack of insights from data. For finance executives, regulation is also a big unknown as lawmakers are still in the process of defining how financial companies should disclose their climate-related risks. 

“We need the financial systems to appropriately reflect the environmental cost of things we do so we can make the right decision. Ultimately, we have to allocate resources, and that’s hard if the metrics don’t align with reality,” said David Kenny, CEO of Nielsen, an American information, data, and market measurement firm.

Nearly 40% of banking executives have a 5-year time horizon of when they expect sustainability investments to improve business performance. 12% of executives say they already see results.