Why sustainability presents one of the greatest opportunities for the financial services industry

“Finance is the UK’s dirty little secret," according to John Sauven, the UK Executive Director of Greenpeace, who went on to explain how “banks and investors are responsible for more emissions than most nations” and berated claims that the UK is leading the world on climate action while “allowing financial institutions to plough billions into fossil fuel production every year.”

This was taken from a 2021 report which also found that UK financial institutions are responsible for 1.8 times the UK’s annual net emissions of CO2.

For the fintech industry, these findings present a massive opportunity to contribute to a new banking and finance ecosystem that is actively tackling the climate crisis instead of accelerating it. Climate-focused fintechs have what is necessary to innovate and help banks to build services and solutions for climate action that they themselves cannot yet provide to captialize on sustainability as one of the best opportunities for the financial services industry.

The growing demand for sustainable options

Sustainability isn’t a trend – it is here to stay. As such, it needs to be addressed – better yet embraced - across all sectors. Conscious consumerism is on the rise and a recent study* highlighted that more than 60% of us are looking for more sustainable finance services and products, yet over half also believe there are not enough choices on the market at present.

Consumers value sustainability and one of the biggest impacts they can have on sustainability is through their finances. But why is the link between finance and the climate crisis so important?

The world, as we know it today, was built on fossil fuels. Therefore, to change that system we need to rethink, future-proof, and transform our infrastructure – quickly. The business-as-usual approach will lead to ruin and shouldn’t be understated. To quote UN Secretary-General António Guterres on the recent IPCC report: “Delay means death”.

To realize the fundamental changes that we need, like greening how we drive to work or heat our homes, we need to fund the sustainable infrastructure for the future. Finance then can play the role of enabler, a tool to actively tackle the climate crisis, for not only new industries, aimed at combating and adapting to climate change, but also through empowering customers with more transparency around their money.

Consumers, whether knowingly or not, are shaping the future of our planet with every swipe of their payment card. Attached to each purchase we make is an environmental currency. The things we buy and consume have an impact on our environment: they emit carbon, they use up water and they impact biodiversity just to name a few. Not every purchase, however, is the same. Despite the plethora of payment data financial institutions possess, consumers aren’t receiving that kind of transparency or empowerment from their banks. And that makes taking climate action much harder.

The relationship between banks and fintechs

At the start of the fintech revolution there were fears that fintech disruptors would challenge the longevity of traditional banks. However, the reality was, for the most part, very different. In fact, mutually beneficial relationships developed as new fintechs carved out niches to help fix some of banking and finance’s biggest challenges.

This new generation of specialised fintechs has proven to be a worthy partner, working with the banking industry to innovate their way of out of problems caused by outdated systems, processes and, frankly, old-fashioned infrastructure. To this end, these fintechs could enable financial service providers to drive a far more effective and attractive customer engagement experience.

Technology and climate change move fast. Traditional banking systems are often not agile enough to stay abreast of changes or even demonstrate effective leadership in this regard, leaving an ever-widening gap between customer expectation and bank offering.

Unlocking the biggest of opportunities for the financial services industry

Consumers are actively looking for climate-friendly solutions; they’re not only willing to change their behaviour, but they are also willing to spend their money in line with their values and beliefs. What’s still missing are easy and effective green banking services.

Enough of minding the gap,

now is the time to bridge it.

The good news is that the payment data for sustainable banking exists. The companies, technologies, and methodologies to transform that data into a force for climate good also exist. Therein lies one of the biggest opportunities for the financial services industry. Change starts with education. By providing transparency on environmental impact based on personal finance data, financial service providers can become sustainability hubs, thereby generating scalable impact and making climate action accessible.

Empowered customers then drive new demand for green products – there too can banks innovate as enablers. The future is green. Why not let customers take part in that future? Through ESG investments into the climate positive sectors and technologies, banks can open new, durable revenue streams while increasing customer centricity, turning the customer’s banking experience into a force for good. When was the last time you left your banking app and felt better about the world than before? Green banking changes that.

The beauty of all this? Banks don’t need to change their core business; they just need to embrace sustainability and make it priority number one. It’s never been easier to disrupt the market by changing so little to generate so much impact on balance sheets and for our planet. In the end, it’s a win for everyone: investors, customers, banks, future generations, and the planet.

*Survey conducted by the PA Consulting Group

Authored by David Lais

David Lais is co-founder and CPO at ecolytiq - a climate engagement provider, enabling banks and other financial institutions to give their customers transparency on how their spending behaviour affects the climate. The ecolytiq software encourages consumers’ behavioural change, offers impact offsetting and sustainable investing as tools for climate action.

This article represents my thoughts but is a real team effort. Many thanks go to our brilliant marketing team at ecolytiq (Max & Yuki) and our lovely friends from Make More Noise for helping me to shape my thoughts into beautiful words.