Pathways in Transformative Sustainability: Bank CEOs Own Their Impact


Over the past decade, businesses, their stakeholders and society as a whole have paid more attention to the role of business in sustainable development as the effects of climate change have become more apparent. But over the past year, something has changed for CEOs around the world. Sustainability talks have turned into action as continued disruptions – including the upheavals of the pandemic – have shone even more of a spotlight on climate change, with society calling for a transformation of economic activities and business priorities.

Transformational sustainability begins with a mindset that makes sustainability an integral part of an organization’s values ​​and business strategy, fundamentally reshaping business models and responding to community needs. One of the ways banks and financial institutions can drive this transformation is to adopt digital technologies strategically and operationally to drive sustainability outcomes while expanding economic opportunity.

In this context, unlike most other sectors, banking and capital markets (BFM) institutions have two key means to implement the global transformational sustainability agenda:

  1. Leverage exponential technologies, like data, AI and cloud, to measure and embed sustainability into their IT architectures and applications – looking for opportunities beyond simply meeting regulatory requirements to reduce environmental footprint of their operations (in line with other industries).
  2. Help retail customers and businesses committed to sustainability and help solve ROI issues by better allocating finance and investments supporting the global transition to a “green economy” and other sustainable outcomes. (specific to BFM)

Over 80% of CEOs expect sustainability investments to improve business results over the next five years

Therefore, sustainability is both an operational challenge and a business opportunity. In a recent study by the IBM Institute for Business Value which surveyed more than 3,000 CEOs, including nearly 300 banking and financial market executives in 40 countries, we found that 80% of BFM CEOs expect sustainable investments to improve business results over the next five years. BFM leaders also recognize that executing transformational sustainability quickly is among the top 3 operational challenges, preceded only by increased cybersecurity risks and demanding regulations. CEOs are feeling the pressure from members of their board of directors (72%) and the investment community (57%) who are demanding radical transparency on their sustainability programs. To address this, BFM CEOs are mobilizing a wide cross section of their leadership teams and departments to make the right investments in sustainability initiatives. BFM CEOs took a broader approach than CEOs in other industries, starting with the engagement of their CFO (69%) and COO (45%).

Accelerating sustainability involves a mindset shift in the use of exponential technologies

The management teams of banks and financial services institutions are working to reduce the environmental footprint and measure their sustainability while investing in exponential technologies such as data, artificial intelligence and hybrid cloud.

We know that transitioning an enterprise to a hybrid cloud is a critical business approach, but it’s also an important driver of sustainability. Transforming the operating model – the way the workforce collaborates and operates with workflows on a hybrid cloud – enables more energy-efficient use of data centers and IT environments. According to the IDC, cloud computing could eliminate one billion metric tons CO2 emissions over the next four years.

The transformation of bank data centers is an opportunity to further advance sustainability by increasing the adoption of renewable energy sources. In the UK, for example, IBM Cloud already uses a network of data centers powered by 100% renewable electricity. In Spain, BBVA modernized its data centers leading to the reduction of the company’s energy consumption by 50%, and, in a period of five years, it expects to reduce carbon dioxide by half at BBVA.

As financial institutions embrace a hybrid cloud approach, a massive amount of data now exists that can help financial firms and businesses across all industries understand their environmental footprint. However, this data remains widely dispersed across different databases, systems, and locations, making it difficult for all stakeholders to access and understand. AI-powered software can help companies leverage sustainability insights across their operations. This can have an impact in areas such as:

  • extend the life of physical assets,
  • create more efficient and resilient supply chains,
  • understand the impact of acute climatic events and chronic physical climatic hazards, and
  • analyze and report on ESG data and initiatives.

This is essential because good governance of data, AI and IT leads to better sustainability.

Sustainability data and information underpins business opportunities relevant to financial services ecosystems

By the end of 2021, 265 banks representing more than 45% of global banking assets had signed up to the United Nations’ “Principles for Responsible Banking”, leading to the development of products and solutions to meet these sustainability commitments. This commitment has included a greater focus by financial institutions on tracking funded emissions, requiring the companies they invest in, across all sectors, to review and reduce their carbon footprint. Sustainability has therefore become an opportunity to differentiate and grow financial services companies.

Our new CEO survey reveals that leaders across industries are feeling pressure to implement sustainability amid business challenges and uncertainty. 59% of CEOs globally cite return on investment (ROI) and unclear economic benefits as the biggest challenges to achieving their sustainability goals, and 44% cite a lack of insight from data. Banks and financial institutions closely monitor and rely on the transparency of other industries regarding their sustainability initiatives. In this regard, they help to alleviate the sustainability concerns of all other industries, placing value in the short to medium term in terms of financial leverage.

Sustainability has become an opportunity to differentiate and grow financial services companies

Banks provide sustainable financing and priority access to capital markets through preferred inclusion in sustainable investment products for institutional and retail clients. Banks and fintechs are also collaborating to orchestrate sustainability-focused data platforms that enable their ecosystem of customers and partners to benefit from participating in a standardized and transparent information exchange.

An action guide to accelerating sustainability as a business opportunity

In a 2022 global outlook report, IBM draws on 12 months of research with financial services industry leaders and discovered that a major imperative for banks today is to find viable sustainability models that balance business value and stakeholder expectations. stakeholders. The industry is currently developing and rolling out initiatives to meet these commitments while ensuring that targeted investments meet overall business and financial objectives.

These initiatives are emerging in four main areas:

  • Integrate climate and sustainability data and information to help manage risk
  • Addressing sustainability in banking – the financial sector’s journey to net zero
  • Develop new products and services to support the sustainability agenda
  • Sustainability Performance Reports

The original article by Shanker Ramamurthy and Brigid McDermott of IBM is here.

Ramamurthy is Managing Partner of IBM’s Global Banking and Financial Markets Consulting Practice, Chairman of the IBM Industry Academy, and Board Member of the Banking Industry Architecture Network. McDermott leads IBM’s industry technology direction as Managing Director, Global Financial Services at IBM.

The views and opinions expressed in this article are those of the author and do not necessarily reflect those of CDOTrends. Photo credit: iStockphoto/TanawatPontchour


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