The Green Finance Podcast Ep. 10: Tangible steps banks can take to help their customers lower their carbon footprint

We've talked a lot on this podcast about the growing consumer awareness around climate change. Considering the scale of the problem, a lot of us feel like we're not doing enough, but also that there's only so much we can do. It's hard to know even where to start as a person, and it gets even harder at company or government level. 

But we are learning, and one of the biggest lessons that I think will define this decade is how our financial choices impact the planet. We choose to shop at a particular store, we choose to buy from a certain brand and we choose to eat what we eat. 

Same goes for the financial system – banks and financial institutions choose who to lend to, and they choose which sectors warrant investments. 

Studies show that when it comes to their bank, consumers do care about alignment with personal values – it was the second-most prized service by bank customers, right after higher interest rates on savings accounts.

The majority of people want to know more about the environmental impact of how they spend their money and want their banks to help them take action and reduce their environmental impact. Moreover, consumers also want their banks to decarbonize, considering the financial support they've given over the past decades to the fossil fuel industry, for example. 

But in order to make the right choices - that is, the choices with the least negative impact on the planet - we need information, we need tools. This means data and technology at scale. 

I'm talking about this today with my guest Emma Kisby, UK & Europe CEO of Cogo - a company that provides carbon footprint management products that enable individuals and businesses to measure, reduce and offset their impact on the climate. There's lots to cover, so let's dive right in.

The following excerpts have been edited for clarity.

What's your overview of what the situation is now with regards to the banking sector, its environmental impact, and more specifically, the impact that it enables?

Emma Kisby: It's no secret that the banks have played a significant role in terms of their investment, which have contributed to the climate crisis. What I feel really encouraged about is there are a lot of banks now stepping up and looking to make a big impact and correct things. The first thing I was thinking about the banks is getting their own house in order, obviously, having a meaningful sustainability strategy to move towards divesting in things like fossil fuels. We're seeing regulatory pressures that are coming in to really encourage banks to be more transparent and disclose in a really positive way. 

But the thing I get really excited about is the huge opportunity that banks have to support their customers and their SMEs to lower their carbon footprint, and that's where Cogo comes in. And we've collaborated really, really well with the banks like NatWest and ING, around bringing solutions that can help customers measure, understand, reduce, and ultimately offset their carbon emissions, and it can have a significant impact.

We were at Money2020, that's where you and I met, and the combined collective customer base of the banks attending Money2020 was in excess of 685 million people. And we did a little bit of math before we went there, and basically worked out that if all of those people just took a few actions, a few lifestyle changes that we know that the banks can nudge and help them to change their behavior, it would reduce carbon emissions by 90 million tonnes. That's the equivalent of planting woodland about three times the size of London, so they have a significant opportunity to really make a difference in this climate crisis, both getting their own house in order and creating solutions and tools for their customers, both consumers and SMEs.

What do those tools look like? 

Emma Kisby: One of the things that we hear from consumers is that this space is really complicated. There's just so much information that you don't even know what you're doing and if you're doing the right thing. We're seeing that consumers are actually increasingly looking to banks to help them give an understanding of the impact of their spend, and people spend closely correlates to the impact they have in terms of carbon emissions. What we do is we help the banks by changing and transforming their spend data into personalized carbon footprints. 

What that actually looks like, if you were to open your NatWest app or your ING app, you would go into your mobile banking to check your bank balance, and there you'd check your carbon footprint or your carbon insights. You can go in and straightaway see your spend translating into a carbon footprint, and then that's all about the understanding and the measuring. 

Secondly, it's about how to reduce footprints, so we help the bank by giving recommendations relevant to customers to actually change their behaviors where they want to, and help them reduce those carbon emissions, and then feed that back. By switching to an energy provider, a renewable energy product, you can reduce your carbon footprint by x. And what that does is that really helps make it very tangible for those customers to make a difference and make a change and then see the benefit of their actions.

How are you able to calculate the footprint of transactions?

Emma Kisby: We take the spend categories from the bank, and then we break those down to the most relevant and most granular we can get to in terms of spending with a merchant. Then we can match those against the emissions factors for those merchants. We're looking at averages, so it's not perfect data. But it's enough data to give you a really good impression of how you're spending and where you're spending and identifying those carbon hotspots, if you like, in terms of where the most carbon intensity is.

When it comes to things like groceries, we can see the carbon footprint of that supermarket, for example, and we can match that against your spend at that supermarket. But what we don't know is what's inside your basket. So what we do is we ask people to input and tell us their diet, because this is the bit that makes a meaningful difference. Because as you can imagine, when you're thinking about carbon calculations, there are lots of things going in and out of the basket, you might be buying locally, or you might be buying air freighted goods. 

There's a lot going on, but the material differences that you can make in terms of your grocery spend is related to your diet. So what we do is we ask the user, whether they are eating red meat or not, vegetarian or vegan, and we're able to reduce your carbon emissions accordingly.

What kind of insights are you guys able to put together as more people use this type of analysis?

Emma Kisby: When we started around two and a half years ago, it was seen as a bit of a nice to have. In the last, I would say six months, that's dramatically changed. We now know that over 400 million people have access to some kind of carbon calculator through their banking experience. It exclusively used to be seen as a bit of a young person's issue. But it's actually not, we actually see a broad demographic appeal, which is really encouraging, so that everyone feels that they have a need to act.

We do definitely see an over index in the 25 to 33 year olds, and some of the actions and recommendations that they will adopt are more relevant to some age profiles and some demographics more than others. So for example, we see that for younger generations fashion is already a key consideration, and actually, they're more likely to do rental or buy second hand. Whereas in an older generation, there tends to be more around energy consumption and thinking through that. And that is probably also reflected in the lifestyle they lead. But overwhelmingly, what we see is real engagement, so it's been amazing to see the work we've done with NatWest. The number of their customers engaged when they carbon footprint, at last public count, it was over 200,000. And we've seen that materially increase since. So it's very exciting. 

We're learning the whole time. This is a new category, it's a new area, carbon literacy is quite low, people don't really understand what their footprint is. So helping people understand things like equivalence, etc. To bring it to life and make it very tangible. We've learned a lot around benchmarking carbon budgets. So we're learning all the time, and we're constantly evolving our proposition.

Can you give us more details about your business solutions as well?

Emma Kisby: What we've seen in the UK is that SMEs are around 30% of all UK emissions, and actually have an enormous opportunity to reduce carbon emissions by around 50%. But only one in 10 of SMEs actually measure their carbon footprint, and there's a number of reasons for that. But it really breaks down to one - knowledge, understanding this space.

As soon as you get into things like Scope, one, two, and three people don't know what it is. It's not their core business, it becomes very complex and confusing, and that drives disengagement. And secondly, it's time. it's just not a priority. Especially now that there are so many other priorities that SMEs are dealing with, and they don't have time to focus on this, even though they know it's a challenge. 

What we're also hearing is that some of the big corporates, especially supermarkets, for example, who are looking to disclose their carbon emissions are putting pressure on SMEs to disclose their emissions because they're having to as part of their reporting, but then these SMEs don't know what it is, and it's a big upheaval for them. 

And then finally, it's kind of really getting clarity around the right financial support to help them make decisions that are not only better for their pocket, but also better for the planet. That's what our solutions look to do - they use spend based data to make it very simple to for an SME to get a really quick snapshot of their carbon footprint, highlight these carbon hotspots of where they can take action, and help signpost what they can do next to actually materially reduce their carbon emissions and save money at the same time.