Financial sustainability: a two-pronged approach
It took a long time for sustainability to go from catchy slogans in the streets to a serious conversation in the boardroom. But there is no denying today that sustainability is a central consideration for all major companies, institutions and government bodies worth their salt.
Most recently, the COP27 conference in Sharm El-Sheikh, Egypt gave the much-needed push to sustainability, laying out robust frameworks, clear targets and firm accountability to be embraced by nations globally.
Even when governments make big moves towards sustainability, it will take time for their actions to show results. It is industry and commerce that will be able to drive impact much earlier, given their efficiency, productivity and relative agility compared to public institutions.
It is therefore encouraging to see that most large organizations’ ESG programs and efforts today feature not only in boardroom discussions and coffee table books, but also in annual reports, investor presentations, stakeholder communications and even in public advertising.
Sustainability measures: banking is lagging behind
Banks have come under scrutiny in recent times for not doing enough to drive sustainability awareness within their organization, nor taking a stand through their lending policies to encourage sustainable ways of doing business.
The road to sustainability is a long one that requires patience and perseverance. Banks that work to continually improve on sustainability will ultimately enjoy the compounding effect of their efforts.
While much has already been written about why banks and financial institutions need to lead on sustainability and ESG action in their businesses, this article focuses on immediate action areas that institutions of various shapes and sizes can work on to build positive sustainability impact, both directly and indirectly, throughout their sphere of influence.
Opportunities for financial sustainability in the bank and beyond
There are two levels of sustainability impact that banks are well positioned to create today. The first is the implementation of ESG standards and targets in the bank itself. And the second is how the bank’s ESG awareness is reflected in its external policies, especially those centered around lending, thereby stimulating the entire ecosystem to be more sustainability-focused and creating greater influence in its sphere of influence.
Given the current status of most banks on sustainability initiatives, there are many opportunities for banks to create impact at both levels. A 2021 CDP study revealed that the banks’ own emissions are negligible compared to the emissions financed by them. The size of bank-financed emissions can be as high as 700 times the bank’s own emissions footprint.
These statistics shine a direct spotlight on the need for banks to not only scrutinize and improve their own sustainability practices, but also be aware of the much bigger difference they can make by lending better and stimulating sustainable businesses in the economy.
Drives sustainability in the bank
Within the bank’s own operations, there are several direct and indirect areas where measuring, monitoring and improving sustainability factors can have a significant effect. While each bank’s circumstances, development and ESG priorities may vary, there are some ESG action areas that naturally deliver high impact, using technological interventions and digitalisation. Below are some sustainability action areas where banks can make a significant impact through technology interventions:
