Author: NayaOne – nayaone.com
Not long ago, paying attention to environmental, social, and governance (ESG) issues was of peripheral interest to enterprises. In the last couple of years there has been a remarkable shift in corporates’ ESG responsibilities and sustainability stewardship have become a board level agenda. Financial institutions, owing to their access to financial data of consumers and businesses, have an unprecedented opportunity to play a pivotal role in the transition towards a sustainable world.
Stakeholders’ pressure drives ESG relevance
Since the pandemic, there is a growing international interest in the impact of climate change on the planet and regulators, consumers, employees, and investors have all rallied around the sustainability agenda.
Since the 2021 UN COP26 climate-change conference in Glasgow, several governments have publicly declared a trajectory to net zero. This has resulted in increased participation by the regulators from several countries such as the UK, Japan, and Hong Kong to translate governments’ net zero commitments into laws, forcing companies to review their carbon footprint and to periodically disclose their ESG performance to stakeholders. In April 2021, the European Commission adopted a proposal for a Corporate Sustainability Reporting Directive (CSRD), to amend the existing reporting requirements of the NFRD (Non-Financial Reporting Directive). The proposal extends the scope to all large companies and all companies listed on regulated markets (except listed micro-enterprises) and also introduces more detailed reporting requirements according to mandatory EU sustainability reporting standards. In April 2022, The European Parliament Backs Amendments to Extend the Scope of the CSRD to include large international corporations selling goods and services in the EU.
Consumers and employees have also shown a clear inclination for sustainability. As per a PwC 2021 report, 83% of consumers think companies should be actively shaping ESG best practices and 86% of employees prefer to support or work for companies that care about the same issues they do. Sustainability has also become a crucial factor to attract talent as younger generations, especially, are keen on working for a company with purpose.
Demand Drivers for sustainability
With climate change gaining more traction amongst environmentally conscious consumers, there is an increasing demand for ways to measure and identify the impacts of their spending patterns on their carbon footprint. Consumers also have started to expect firms to help them make sustainable lifestyle choices by enabling them to factor sustainability into their consumption decisions. A report by the IBM Institute for Business Value (IBV) found that 93% of global respondents feel that the pandemic had influenced their views on sustainability. Another IBM survey from February 2022 found that more than half (51%) of respondents say environmental sustainability is more important to them today than it was 12 months ago.
Businesses have a key role in accelerating the low carbon transition and helping the world achieve the Paris Agreement target by the end of the decade. Large cuts in GHG emissions are needed across each industry, coupled with compensatory measures such as tree plantation or investments in carbon offsetting projects is needed to accelerate the journey towards net zero emissions.
Supply side undercurrents for sustainability
Significant market demand has led to a deluge of technology providers who offer carbon footprinting, emissions accounting, and integrated carbon offsetting platforms. These specialist ClimateTech providers have built specific sustainability services targeted at consumer and business segments. Some of these ClimateTech providers for B2B and B2C propositions are illustrated below in the diagram.
Embedded Eco-friendly Banking Propositions for Customers
Banks have a unique opportunity to help consumers and businesses understand their carbon footprint and take retrospective and pre-emptive actions to minimise it. Banks already have access to demographic, behavioural and transactional data of customers, have frequent interactions with them for various financial activities, and enjoy a significant level of trust. This makes banks a preferred and suitable organisation to offer sustainability advice to customers.
In the era of Open banking, banks have also started sharing consent-based data with third parties to build customer-centric financial and lifestyle services, that are often offered as an integrated service within the banks’ applications. This opens up the possibility for banks to offer sustainability services to their customers — both retail and enterprise, by embedding the offerings from ClimateTech providers. There are critical upsides for banks, their customers, ClimateTech providers, and of course the planet to unleash a win-win situation for all the stakeholders involved.
In addition to meeting the demands of carbon conscious consumers and businesses, eco-friendly banking also helps banks to meet regulatory requirements by aligning their business models with global sustainability agenda and improve brand reputation especially among Gen Z and Millennials.
Accelerate Sustainability Efforts with NayaOne
NayaOne offers an ESG Marketplace with pre-vetted ClimateTech providers for financial institutions to quickly discover and onboard for innovation projects. It also offers an integrated Innovation platform and ESG datasets for financial institutions to aid rapid experimentation, evaluation benchmarking, and launch of sustainability propositions to customers.
NayaOne revolutionises innovation in financial services. We provide banks with a single point of access to hundreds of fintechs and datasets, through our Digital Sandbox and Fintech-as-a Service offering. Regulated firms are able to discover, build, evaluate and scale with fintechs in a matter of weeks instead of months.