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

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

What we're writing

The reversal of Roe v. Wade: Its impact on economic growth, financial wellbeing, and the financial services industry

Roe v. Wade has been overturned, after almost half a century -- what does that mean financially for America?

It’s digital, but is it green? The effects of payments on the environment, in 4 charts

Payments won't be green until we tackle the emissions inherent to the smartphone industry. In 2021, the e-waste generated globally weighed as much as the Great Wall of China.

Big banks are financing the fossil fuel industry – and it’s time consumers know it’s with their money

Currently $18 trillion is sitting in savings and checking accounts, and Ando Money CEO JP McNeill believes that it can be used by banks to finance “all sorts of things”, including those that make climate change worse.

The culture shift needed for the banking system to focus on climate risks

Employees often wait for top-down guidance on climate issues, but there are also many banking professionals fighting for change inside their institutions to address this.

Chart of the week

Source: BCG

What we're reading 

BlackRock pulls back support for climate and social resolutions 

Why climate change disproportionately impacts women

Why leaders see climate action as the future of competitive advantage

Banks far from hitting Paris climate targets, groups warn

Here's how the new US climate deal could make energy bills cheaper 

Early-stage climate tech offers a bright spot amid the gloom