Bringing sustainability to the Bank


In the spring of 2021, a new API called Carbon Calculator has debuted, giving consumers an overview of the carbon emissions generated by their purchases, as well as tips for living more sustainably and even opportunities to contribute to reforestation projects.

The source of the carbon calculator? None other than Mastercard, which has made the API (developed in tandem with Swedish fintech company Doconomy) available to banks to integrate into their own apps.

In unveiling the Carbon Calculator API, Mastercard cited “a growing trend toward eco-responsible spending and consumption among people who want to turn their purchases and rewards into meaningful action for the planet.” Recent research from the company found that 85% of adults are willing to take personal action on environmental and sustainability issues.

Driven by factors such as customer preference, regulatory requirements and their own ESG (environmental/social/governance) policies, financial institutions around the world are embracing the role of catalyst in the low carbon and sustainability movement. . Within nine months of its formation in April 2021, the United Nations-sponsored Net-Zero Banking Alliance had surpassed 100 members representing more than 40% of global banking assets. “This rapid adoption speaks to the urgency now shown by leaders across the financial sector to address the climate emergency at the pace and scale required,” said Eric Usher, head of the United Nations Environment Programme’s Finance Initiative.

Whether we like it or not, in their roles as lenders, investors, asset managers, service providers and corporate citizens, banks are at the heart of the sustainable development movement, which confronts them with two key questions:

  1. How to internalize ESG and sustainability in all facets of the company?
  2. How to make sustainable development a real competitive advantage?

The first question relates to the challenge of embedding sustainability into organizational DNA, where it is a factor in virtually every decision a bank makes, from lending and investment choices to the products and services it prioritizes to how it manages its operational carbon footprint. On the commercial lending side, for example, lending to a company with an inordinately high carbon footprint not only increases a bank’s risk exposure, in an increasingly sustainability-conscious world, but it will also have a bad image of the bank and its brand.

The same approach applies to a bank’s choices regarding its suppliers and its real estate assets. How and from whom they source supplies like paper for deposit slips and checks, or pens they distribute at branches, as well as how they manage the carbon footprint of their physical assets. What steps can an institution take to reduce the carbon footprint of its real estate portfolio and individual buildings? To what extent would moving more business processes to the cloud rather than maintaining physical IT infrastructure on-premises (servers, data centers, etc.) reduce the carbon footprint?

To answer such questions, banks must have the capacity to collect, analyze and act on large amounts of sustainability and ESG data, not only on their own operations, but also from suppliers, partners and lending customers, so that they can be assessed accordingly. The transparent exchange of sustainability-related data up and down the value chain is essential for companies to make sound sustainability choices and meet the growing reporting and compliance responsibilities associated with the carbon footprint.

How to make sense of all this internal and external data? Here is where a durability “Control Tower” that provides a comprehensive view of data from across the enterprise and value chain can help banks understand the trade-offs and make decisions based on the interrelationships between financial, operational and sustainability performance. With a clear line of sight to the relationship between sustainable investments and business success, banks can spot patterns, model scenarios, and make choices based on insights from data. From the control tower, an institution can also establish, implement and track sustainability-related KPIs across the business, which in turn helps reinforce ESG priorities and values ​​across the board. organisation.

Late last year, SC Ventures, a UK-based arm of Standard Chartered Bank, partnered with banking-as-a-service (BaaS) company Starling Banking Services to launch a digital platform called Shoal that connects customers’ money to green projects. The platform’s first product is a savings account with which account holders can choose to support renewable energy, community clean water development, and more. Their money goes directly to funding projects in a chosen area (while also earning a competitive rate of return), and Shoal provides regular updates on the projects they’ve helped fund.

Services such as Shoal and Mastercard’s Carbon Calculator are among new business models financial firms are exploring in an effort to positively impact the world and bottom line. It’s all about leveraging a leadership role in sustainability to differentiate and connect with sustainability-conscious consumers like Gen Z – and increase share of wallet with new revenue streams. profitable along the way. The intention with Shoal, explained Bill Winters, Group Managing Director at Standard Chartered, is to “Unlock much-needed retail capital to fund sustainable projects in areas of the world where the impact will be greatest and empower savers to earn money, while making money for good.”

At its core, banks have the ability to market their own superior sustainability/ESG performance to stand out from their peers. This will depend on their ability to clearly track and report on sustainability/ESG activities.

But the opportunities extend far beyond simple brand awareness. One is the opportunity to be part of a larger open banking ecosystem, like Shoal is on the Starling consumer platform. Another possibility is to explore behavioral banking, using information and incentives to help consumers take a proactive role in the sustainability movement. And commercially, lending programs and products for sustainability and circular economy initiatives can help banks build a product portfolio that resonates in a world where the financial shade of green and the shade of environmental green are blurrier than ever. .

Kris Kowal, MBA, CSPO, is the Global Head of Retail Banking for SAP America.


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