The pressure for banks to take steps towards sustainable banking is coming from different stakeholders such as regulators, employees and even customers. Decarbonising portfolios, funding organisations such as renewable energy firms, compelling companies to be more sustainable when approving loans and supporting their own in-house green projects are increasingly important to them.
Banks fuel the world’s economy with their capital investment; where they invest their money will affect the success of sustainability. Technology and digital platforms can become real drivers to achieve applications sustainability in their own business, which feeds into the ultimate objective of reaching sustainable banking.
Sustainable banking involves the strategic planning and execution of banking operations and business activities while at the same time considering the impact to the environmental, social and governance (ESG) landscape. In the banking sector, social responsibility and governance have been around for a few years; however, the environmental commitment was missing.
Foundation for sustainable banking
Global initiatives such as the United Nations’ Sustainable Development Goals (SDGs)—also known as Global Goals and Principles for Responsible Banking—have laid the foundation for banks in their journey to sustainable banking.
By incorporating sustainability principles into corporate strategy funding decisions and product/service definition processes, banks can be influential in supporting and promoting environmentally responsible projects and enterprises. From their physical storefronts and corporate buildings to their ATM fleets and cash-cycle processes, banks can make a positive impact on the environment. By adopting Principles for Responsible Banking, they commit to aligning business strategy to be consistent with and contribute to goals as expressed in the Sustainable Development Goals, the Paris Climate Agreement, and relevant national and regional frameworks. And as central banks and capital market regulators continue to raise key questions around how data is collected, analysed, used and disseminated, financial services entities are taking steps to measure and report the impact of their sustainability performance through data elements using ESG / CSR reporting, visualisation, modeling, industrialisation and automation.
Digital platforms can facilitate sustainability priorities in banking, including net-zero emissions and energy efficiency, and contribute to building social goodwill and strengthening the brand.
Technology and digital platforms support
Addressing ESG requirements is no longer just a matter of meeting regulatory and compliance standards, but about creating products that resonate with a digitally-native and sustainability-focused customer base.
Digital platforms can facilitate sustainability priorities in banking, including net-zero emissions and energy efficiency, and contribute to building social goodwill and strengthening the brand. Technologies such as blockchain, big data, artificial intelligence (AI), machine learning (ML), natural language processing (NLP), robotic process automation (RPA), optical character recognition (OCR), cloud computing, Internet of Things (IoT) and quantum computing are creating infinite opportunities for banks in their journey to design financial processes and products for sustainable banking that also provide a competitive edge.
For example, ML, OCR, NLP and API integration facilitate the Loan Origination digital platform that enables banks to scan, extract, classify, and intelligently upload, share and store electronic documents. Paperless banking supports the drive to reach net-zero emission targets.
Many banks are also adopting green cloud computing infrastructure for energy efficiency. The Green Bonds Management platform leverages blockchain, IoT, Big Data, ML and NLP to support financing projects that help reduce the effects of climate change or protect the environment by offsetting emissions in proportion to their outlay. Banks are enabling green finance by developing innovative methods that cut the cost of green certification, improve green credit-ratings systems for the SME (small- and medium-enterprise) banking market, and boost their capacity to identify and classify green projects.
Building application sustainability in coding is a non-functional requirement. Thus, their applications design choices, suitable technology infrastructure, open and composable applications architecture, implementation of emerging technologies and tools to monitor applications performance, etc., are important for banks from an energy consumption and sustainability perspective. Banks can use them to help determine how efficiently their business operates.
Moving workloads to the cloud and using edge devices that consume less energy, as well as implementing carbon footprint monitoring and reporting tools, are vital to a sustainable infrastructure.
Banks also can support the drive to application sustainability by taking actions such as continually optimising software using smart DevOps processes, and building optimised DevOps pipelines, with the goal of more efficient energy usage. Moving workloads to the cloud and using edge devices that consume less energy, as well as implementing carbon footprint monitoring and reporting tools, are vital to a sustainable infrastructure, too. Deploying applications to cloud service provider regions with data centres where workloads are more likely to be powered by renewable and low-carbon energy sources supports the goal of suitable workloads and data usage.
There are many more opportunities for banks to display their technology prowess in driving support for environmental initiatives in their internal operations and external work. As more competitors go green, there’s no time to waste in taking bold action.
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