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Green Finance Briefing: What’s a sustainable business strategy in banking?

Executives need to start thinking of how to create and execute a sustainability strategy as the economy transitions to a carbon-neutral future.
At Tearsheet's Banking on the Planet conference, speakers outlined how financial companies can start on their sustainability journeys – it's all about education, collaboration and transparency.

Iulia Ciutina | August 05, 2022

Green Finance Briefing: What’s a sustainable business strategy in banking?

Every executive needs to start thinking about strategies that will capture a long-term competitive advantage from the net-zero transition. In banking and finance, this means a comprehensive awareness of what your business is enabling.

This was the main takeaway from last week’s Banking on the Planet Conference, where some of the industry’s top professionals shared their insights on the role of finance in a sustainable economy.

We talked about this topic from all angles – from sustainable investments and ESG, to consumer banking, to reporting and emissions reduction.

The reality today is that we are nowhere close to where we should be in terms of understanding how valuable it is to be prepared for the future. There is a huge educational component that needs to continue developing, especially in the senior management of financial and banking organizations. A sustainability-oriented culture has yet to take hold in finance.

“There’s still this island of ESG and sustainability in many organizations trying to push this agenda across the board, but they don’t have the buy-in yet from all the stakeholders, and that’s the transition that we’re going through at the moment,” according to Lubomila Jordanova, CEO and founder of Plan A.

However, there is a silver lining – the second biggest takeaway from the conference is that demand is on the rise for “sustainability services”, whether that’s reporting software, ESG investment platforms, or green banking consumer products.

Products that help companies assess, monitor, and manage their carbon emissions are becoming increasingly popular, and banks are lining up to partner with climate fintechs that offer these types of services. Many of these partnerships have been inked recently, so we should expect to see some outcomes in a few years.

When it comes to this intersection between sustainability and finance, many execs are attempting to walk this line by pointing to ambitious net-zero statements and ESG targets as evidence that their companies are front-runners in the race to sustainability.

But considering all the greenwashing that is happening today, there needs to be a clear strategy behind any commitments or ESG targets, and transparency is key here.

“Develop an ambitious plan, but be transparent about it, report publicly on it, set interim targets, and be realistic. You may not have all the answers, you may reiterate along the way, and even make mistakes – but consumers want intellectual honesty, transparency, and credible plans,” advised Lucy Hargreaves, head of public affairs and policy at Patch.

When it comes to sustainability strategies, most executives are still trying to figure out what works. Only 20% of current sustainability initiatives showed any meaningful connection to business drivers, according to BCG Research, showing that we’re still missing the mark.

“CEOs need to approach the challenges of sustainability from a strategic and value-creation perspective in terms of both the questions they ask and the answers they seek,” the report said.

Sustainability should theoretically be applied in every corner of business – decision-making frameworks, capital allocation, governance practices and incentives, BCG argues.

Any agenda that aims to incorporate this should be anchored by the company’s R&D portfolio, form partnerships with external vendors, and take advantage of emerging technologies in the rapidly expanding startup space.

Some of the leading climate fintechs spoke at our conference about their business and how they can help any company become more sustainable – so if you’re looking for some inspiration, you can access all session videos here.

Overall, although there is still a lot of work to be done, I am feeling hopeful that there are solutions, products, services, companies, and people that can help the banking sector reach net zero targets.

Quote of the week

“In the world we’re in right now, having sustainability built into your product is considered a nice-to-have or maybe a bonus differentiator. In the world we’re moving towards, though, this is going to become table stakes. Actually, in a surprisingly short amount of time, probably 80% or 90% of the top 10 banks in the world are going to have some sort of consumer-facing product that has a sustainability offering folded within it. We’re gonna flip from something nice to have to a must-have very, very quickly.”

Brennan Spellacy, CEO of Patch

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