From reducing oil and gas investments to regulating greenhouse emissions, here’s how financial institutions are putting environmental issues center stage
News about two North American banking giants making an even bigger commitment to cutting greenhouse gas emissions from energy-lending clients – and their own footprint – is further evidence of a sea change in financial services. While it’s true that Canadian-based banks like BMO and TD often lead on environmental issues, there is no doubt that sustainability is spreading. With annual Environmental, Social, and Governance (ESG) reports coming out this month just ahead of Earth Day on April 22, what better time to take stock of how the industry is doing in protecting our shared environment?
In a recent article on the future of banking going green, Finextra predicts a win-win for customers and institutions when banks offer sustainable products and services. “We will see banks undertake environmental audits of customers when they take out a loan and periodically throughout the life of their loan,” says Steve Morgan from Pegasystems. “If the customer can improve their impact on the environment, the bank will decrease the interest rate.” Such moves would attract more cost-conscious and environmentally-minded consumers to these financial institutions.
A focus on environmental impact also gives banks another way to demonstrate their purpose, something that consumers report is very important to them in their banking relationships. In fact, as outlined Deloitte’s global Better Banking Survey, more than 60% of respondents said they’d leave their bank if they discovered it contributed to significant social or environmental harm. With banking investments in fossil fuels drawing attention from shareholders and the media, people are increasingly demanding banks do better, especially Gen Z and the up-and-coming Alpha.
“Younger consumers, who rate climate change as a much greater threat than their older peers do, are far more likely to use ESG investment tools,” according to an Insider Intelligence analysis. “And choose or switch banks according to their ethics or purpose.” No doubt, the industry is paying attention, with recent announcements from Wells Fargo about their expanded chief sustainability officer role and Bank of America accelerating sustainable capital –continuing a well-documented post-COVID upsurge in purpose with brands committing to change.
Stay tuned as Believe in Banking continues to provide news and insights on the industry’s latest developments, like environmental, social, and governance issues in banking. For insights on best practices in banking, contact the banking and credit union experts at Adrenaline at firstname.lastname@example.org.