By aligning ethical banking with profits, banks have realized that ‘doing the right thing’ is a win-win for financial institutions and are ready to support customers in their sustainability journeys.
We are now living in a world where ethics are being used as a competitive advantage. This has never been more relevant for financial institutions, who are realizing new and profitable opportunities by doing what’s right. Banks are taking measured steps to help build a greener future and working hand in hand with their customers to assist them in making better informed choices that contribute to a more environmentally conscious society.
Banks recognize the critical need to address climate change and are taking proactive measures to incorporate sustainable practices into their operations. By integrating environmental, social, and governance (ESG) factors into their decision-making processes, banks actively contribute to the transition toward a low-carbon economy. This includes supporting renewable energy projects, investing in clean technologies, and promoting environmentally responsible initiatives.
Financial Transparency: Building Trust and Accountability
In the pursuit of ethical banking, transparency is paramount. Banks are stepping up by disclosing their climate-related risks and opportunities, allowing customers to make well-informed decisions. By openly sharing information about their investments, banks build trust and accountability, empowering customers to support institutions aligned with their sustainability goals. This transparency encourages responsible investment and fosters a stronger partnership between banks and their customers.
In a survey by Mambu, 70% of global consumers would choose a bank that puts purpose over profits, and 58% would even be willing to pay a premium for finance for financial services that help the environment and local communities. In this context, smaller banks have an opportunity to stand out against their larger competitors and gain positive exposure as well as market share among increasingly eco-conscious customers.
As the focus on sustainable business increases, the rise of greenwashing and causewashing poses a challenge. Banks are committed to addressing this issue by scrutinizing the environmental claims made by companies seeking funding. By promoting transparent reporting and responsible investment, banks ensure that customers can trust the institutions they choose to support.
Ethical Banking and the Cost of Living Crisis
The cost of living crisis has become a significant concern for individuals and communities worldwide. Banks are acknowledging this challenge and offering financial products and services that promote energy efficiency and reduce costs. For instance, banks provide low-interest loans for home renovations aimed at improving energy efficiency or installing solar panels. Some banks also offer attractive financing options for purchasing electric vehicles, contributing to a greener future while helping customers save money on energy expenses.
In a recent interview, Matt Hammerstein, CEO of Barclays Bank UK said, “This situation is very different from the pandemic, which hit everyone all at once in a similar way. We have to tailor things much more to individual circumstances. First, we’re making sure customers have access to important information they need to help their situation, and secondly, we’re reaching out to customers proactively when they have been identified as at risk or in need of targeted support.”
Carbon Credits: Opportunities for Ethical Banking
Banks are actively supporting the use of carbon credits to incentivize emissions reduction. By investing in projects that effectively reduce greenhouse gas emissions, banks enable customers to offset their carbon footprint. For example, customers can participate in carbon credit programs that fund initiatives like reforestation, renewable energy projects, or waste reduction. These initiatives not only help combat climate change but also empower customers to actively engage in sustainable practices.
In 2021 Banco Sabadell teamed up with our team here at ClimateTrade to offset the CO2 emissions associated with its business operations that year by investing in forest projects in Spain. Banco Sabadell approved the offsetting of 3,632 tons of CO2, representing emissions from scope 1, 2 and 3 (relating to business travel), through investment in a Spanish project certified by the Ministry of Ecological Transition (MITECO).
Banks are playing a pivotal role in funding environmentally-friendly projects that contribute to a greener future. Just last year, Europe’s largest bank HSBC announced that it would stop financing hard-to-abate industries as part of its efforts to drive down global greenhouse gas emissions. In 2020, HSBC made a pledge to be “net zero” which means not adding to greenhouse gasses already in the atmosphere and investing and loaning up to $1 trillion (£806bn) in green projects.
By prioritizing investments in renewable energy, clean technologies, and sustainable initiatives, banks channel capital toward endeavors with a positive impact on the environment. These investments provide customers with opportunities to align their financial decisions with their environmental values and actively support a sustainable future.
Carbon Footprint & Climate Technology
There are many innovative tools that were built to empower customers on the fight against climate change. One example is the ClimateTrade API that was implemented in the Santander APP that allows the bank customers to track, measure, and reduce their environmental impact by analyzing the purchases made through their Mastercard credit card. Furthermore, the API is connected with ClimateTrade marketplace which gives customers the opportunity to actively participate in sustainability efforts by selecting from a range of sustainable projects and offsetting their carbon footprint. This comprehensive approach to climate technology not only encourages the adoption of sustainable lifestyles but also facilitates tangible contributions to a greener future.
It is clear that Banks are stepping up to empower customers for a greener future by integrating ethics and sustainability into their operations. They are not only driving positive change but also encouraging customers to actively engage in sustainable practices and contribute to a greener future. By aligning ethics with profits, banks are proving that doing the right thing is not only good for the planet but also for their bottom line. Learn more about ClimateTrade’s bespoke climate tech solutions for the finance industry.
