The quest to address the most pressing issue of environmental degradation has evolved into a worldwide mainstay concept influencing sectors like financial services to transform their business models.
Against the backdrop, GlobalData says the concept of green banking came to the spotlight, and the recent sustainability initiatives by financial institutions demonstrate how it will become a game-changer.
According to Kiran Raj, practice head of disruptive tech at GlobalData noted that with the global transition towards the creation of a low-carbon, climate-resilient, and circular economy (as described in CORDIS), banks are reeling under pressure surrounded by customers demanding transparency and accountability as well as investors equating financial risks with sustainability.
“They are increasingly exploring value propositions that not only empower them to meet global goals but also propel revenue growth and offer a competitive advantage,” he adds.
Shagun Sachdeva, project manager of disruptive tech at GlobalData, sees green banking as a key enabler of the planet-saving decarbonisation journey, financial institutions are betting big to support an entire gamut of priorities right from the development and adoption of climate-friendly banking practices, focus on green and social bonds, greater investments in green projects to transition from traditional energy sources towards renewable energy.
“Albeit the demand for green banking products far exceeds supply, the key for the financial institutions will be to remain consistent in building a solid sustainable banking value proposition that enables them to defend existing relationships, expand their market share, and create differentiation in the offerings,” she added.
Startups driving innovation in the green banking space
Germany-based green finance startup ecolytiq has developed an all-in-one sustainability-as-a-service (SaaS) solution to enable financial institutions to offer environmental footprinting, personalised impact offsetting, and environmental, social, and governance (ESG) investments to their customers. The startup works in partnership with financial institutions such as Visa, Rabobank, and Tink.
Sweden-based Doconomy created a credit card DO Black that tracks CO2 emissions from bank transactions and limits the impact of customers' spending on the environment. The startup has collaborated with banks such as Standard Chartered, Bank of the West, and Commercial Bank of Ceylon.
UK-based Yayzy created a fintech platform to assist banks and fintech companies to incorporate sustainability data into their customer transaction data. It offers users recommendations on how to easily decrease and offset banks’ carbon footprint using a mobile app. Yayzy boasts to support big banks such as Santander, BBVA, and Deutsche Bank.
CO2 Connect (CO2X), a Singapore-based startup, has developed a solution that offers regional small and medium-sized businesses (SMEs) access to green finance services by automating carbon emission estimates and reporting. It works with banks such as OCBC and United Overseas.
The road ahead
Sachdeva cautions that while green banking will continue to transform the banking industry through partnerships, initiatives, and innovations, it will take time to scale up.
She observes that financial institutions, for now, seem to be confident of the success rate of green banking products. However, achieving it depends on implementing a comprehensive and coherent strategy.
“If the potential of green and sustainable finance is to be maximised, what we need is require a mix of policy interventions defining a consistent set of global disclosure standards, a globally accepted core taxonomy, development and transparent use of well-defined metrics, and certification labels.”
Shagun Sachdeva
