Cynthia Ezekwe
At least 73 per cent of banks globally are expected to offer more sustainable banking solutions by 2028 as banks increasingly shift their focus towards Environmental, social and governance (ESG) propositions through sustainable banking options, according to Economist Impact, a research and insights division of The Economist Group.
The report,titled “Byte-sized banking: Can banks create a true ecosystem with embedded finance?’’, commissioned by Temenos AG, a Swiss enterprise software company, found that the shift is driven by growing demand from customers, who are increasingly concerned about the environmental and social impacts of their financial choices.
The Environmental, Social and Governance (ESG) framework is increasingly being used by businesses, investors and regulators to evaluate and measure a company’s sustainability and ethical performance. The framework covers a wide range of issues, including environmental impact, social responsibility, human rights, and governance practices. It provides a comprehensive view of a company’s operations, including its business strategy, risk management, and stakeholder engagement.
One of the key findings of the report encompassing 300 banking executives globally,was the growing influence of Generation Z, the cohort of people born between 1995 and 2010. This demographic is known for being highly conscious of ethical and sustainable issues, and they are increasingly demanding that their banks align with these values. The survey found that, globally, 66 per cent of banking executives believe that Generation Z is driving demand for sustainable banking. The report noted that this trend is likely to continue, as Generation Z is expected to become a key banking demographic in the future.
The report highlighted the banking industry’s strong commitment to environmental concerns, noting that globally, 37 per cent of banks globally are channelling investments into low-carbon technologies and decarbonisation start-ups, while 31 per cent are implementing sustainability strategies that encompass both their supply chains and internal operations. In addition, three-quarters of the banks surveyed said they plan to fund eco-friendly projects over the next four years. These investments include renewable energy, green infrastructure, and carbon sequestration. The report also noted that banks are increasingly using environmental metrics to assess the risk of their investments, in addition to traditional financial metrics.
In addition to the internal initiatives, the report highlighted that the banking industry’s commitment to environmental concerns is also reflected in its investment strategy. According to the survey, 74 per cent of the banks interviewed are planning to fund eco-friendly projects in the next four years, which could have a significant impact on the environment.
The report found that 51 per cent of banks surveyed are predicting an end to private data centres in the coming years, in favour of public cloud operations. The move to public cloud services is considered not only more cost-effective, but it also has a significantly lower carbon footprint.
Kalliopi Chioti, the chief marketing and ESG officer at Temenos, commented that banks are being influenced by evolving consumer preferences. He noted that banks are being pressured to operate according to a clear set of values, and that this is shaping their agendas and strategies. Chioti also emphasized the role of technology in helping banks to align their operations with these values, for example, through the use of artificial intelligence to align investment strategies with clients’ values. He also mentioned that banks can reduce their carbon footprint through the use of economies of scale on cloud solutions.
Overall, Chioti stressed the importance of technology in helping banks to address the changing preferences of their customers and to become more sustainable.
