A sustainability agenda and climate change have soared to the top of many business goals in the past few years, not in the least for banks. Sustainable finance is a hot topic on the rise.
And aspects such as ESG accounting, offering green investments, and enabling the transition to a low-carbon economy put pressure on banks to deliver a sound sustainability agenda.
But what are the risks and pressures driving this sustainability transition? And what are the opportunities that green finance brings?
Let’s dig into it!
Environmental risks = business risks
The need to reboot the economy after the corona pandemic has been the talk of the town recently. Often with the implication that climate action needs to take a backseat.
But is it possible to reboot the economy without steering it in a more sustainable direction with a sustainability agenda? The short answer: no, it isn’t. There’s a greater need than ever for businesses to respond to climate risks.
According to a World Economic Forum survey, even in 2020, after the outbreak of Covid-19, all five environmental risks ranked in the top 10 global risks that businesses face. The only risk that placed above “biodiversity loss and ecosystem collapse” and “natural catastrophes” to claim the top spot was, rather unsurprisingly, the “spread of infectious diseases.”
The most recent survey looked ahead at the most severe global risks over the next 10 years, where environmental risks took the top three and “climate action failure” came out on top.
Sustainability agenda – Pressure is on
Clearly, mitigating climate change and mitigating business risks are intertwined today. But that’s not the only driver for banks to prioritize climate action through a robust sustainability strategy. Pressure is also mounting from consumers and employees, calling for a greener finance sector.
Climate engagement is growing across the world. As consumers, we realize we can make a real difference in the climate through our consumption. And as employees, we want to work for a company that we can feel proud to represent.
The younger generations are placing a significant emphasis on green investments. Already in 2017, 86% of millennials were interested in sustainable investments. At the same time, 90% wanted it to be an option for their retirement funds.
Last year, Gen Z considered green and sustainable investing a primary investment trend. While 80% said they would invest more sustainably if they had financial tools. And even among this younger Generation Z, 94% believed that corporations should address social and environmental issues.
This is increasingly gearing the competitive landscape towards sustainability concerns. The current speed with which the transition towards sustainability is happening is too slow. And if science has taught us anything, we need to act now, before it’s too late.
It’s time to speed up the shift and ensure that the risk of failing to act on climate change isn’t realized. Fortunately, banks have more reasons to develop and push for their sustainability agenda than just mitigating risks and meeting pressures from consumers and employees.
Profiting through a sustainability agenda
Apart from mitigating climate change, climate action can also yield significant profits for banks. According to the Global Commission on the Economy and Climate, replacing business-as-usual with bold climate action could lead to profits amounting to at least US$26 trillion by 2030.
This forecast is strongly reflected in the recent growth of sustainability-linked loans, which tripled between 2018 and 2019 to reach US$140 billion. And between 2019 and 2020, the global sustainable debt capital increased by 30% to reach US$700 billion.
So clearly, there’s money to be made in sustainable finance, which, along with the environmental gains, makes it the very definition of a win-win opportunity for banks.
Integrating climate action in sustainability strategies
It’s high time for banks to target climate change more aggressively and implement A clear sustainability agenda in their business strategy. But how to go about it?
Banks aren’t generally considered authorities in the environmental field. With relatively new areas such as green finance and green investments, there are always concerns about false or misleading information in the shape of greenwashing.
To avoid falling into the greenwashing trap, banks need to take concrete climate action and reduce their emissions. Bringing both employees and customers along on the journey is an excellent way of legitimizing environmental efforts.
Using Deedster’s climate change data and carbon footprint calculator, banks can also provide an educational platform for employees and customers alike to begin working on reducing their emissions and even learning how to invest more sustainably.
But increasing awareness and knowledge and pushing for a sustainability agenda is one thing. Actually, reducing emissions requires climate action. That’s why Deedster specializes in more than being a provider of climate change data and carbon insights.
Creating customer and employee engagement is a core part of Deedster’s solution, with the conviction that no one can do everything, but everyone can combat climate change. As the enablers of consumption, banks have the potential to introduce the sustainability agenda and make a real difference for consumers, employees, and the climate.
By letting Deedster help integrate climate action into their sustainability strategy and work, banks can capitalize on the opportunities transitioning towards sustainability offers. Create customer and employee engagement, and become part of the solution. The time for action is now.
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