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How Sustainability Will Change The Banking Sector

A carbon footprint measures the number of greenhouse gases produced in a human's day-to-day activities. Therefore, reducing it improves the sustainability of the environment to a great extent, while increasing it has opposite effects. Sustainability greatly affects all sectors, including the banking sector. Banks are now adopting sustainability principles that will change the financial sector and its future long-term strategy.

Net zero emission refers to the efforts of eliminating all man-made greenhouse gases from the Earth's atmosphere, to reduce its net climate balance. The banking sector has adopted these reduction techniques in an attempt to curb carbon emissions from their operations, and from companies they have financed. Furthermore, many others have joined the financial sector in pledging net zero emissions by 2050.

Why is sustainability important?

Sustainability is the answer to making our world a greener place to live in the future. Everyone has to take it very seriously. We have ignored the problem for too long. Now is the time for large corporations and banks to lead the way, to achieve a greener planet to secure the future of the people who are coming after us.

Achieving sustainability is no longer seen as an ideology but as a process, a trans-partisan sciences-backed goal, and a value. Sustainability is becoming more and more part of our lives. We should take personal responsibility for making our daily lives more eco-friendly. Being sustainable is something that should affect our decision-making in all aspects of everyday life. It's time to start now.

What can banks do for sustainability?

First of all, what does long term sustainability look like for the banking sector? According to the worldwide known consulting firm Deloitte, “Sustainable banking integrates environmental, social and governance (ESG) criteria into traditional banking, and sets ESG benefits as a key objective. The banking sector has to take this philosophy seriously. If they do, these criteria will be effective and enduring.

Following these criteria are essential to achieving a sustainable and zero emissions world. Banks must be instrumental in leading the way. They can start by being more sustainable themselves and expand this philosophy to their customers. They can invest in eco-friendly companies that supply sustainable products. Most importantly, they can put pressure on companies to be more sustainable when approving loans.

Does green finance affect a bank's bottom line?

Green finance is a mission that the banks are slowly buying into. They have realized that not only is it the right thing to do, but they can still make a profit out of doing so. Although in the short term their bottom line might suffer a bit in the long run it will be proven to be a wise strategic decision.

There is still, a soon-to-be outdated vision, anchored in many countries' policies that sustainability does not drive any stream of revenue. However, in 2020 a report conducted by GABV proved that banks taking on green customers were seeing a higher return on investment, equity, and assets than the ones who do not. Green finance is here and is beginning to work well.

The role of banks in reducing our carbon footprint

Climate change risks make sustainability important for banks. They are the largest source of funding for corporations, from small medium-sized firms to huge multinational mega-companies. Furthermore, they fuel the worlds' economy with their capital investment. Where banks put their money will affect the direction of the economy and sustainability. This, in turn, will determine how our society looks in the future.

The effect of youth

Sustainable principles help banks attract younger customers. People between the ages of 20 and 30 are seeking a product that will help the environment. Cashback on environmentally friendly products is a good example of this A commitment to sustainability also helps banks employ socially conscious employees that will become their next generation of management executives. So going green secures the bank's future.

Putting pressure on their customers

Banks are now taking into account environmental factors before they approve loans to companies. They investigate the company's history and workplace practices. Furthermore, they want to know their future green strategy. If they do not meet their criteria they may be refused a loan. This puts huge pressure on the company to implement a clear plan for increased sustainability in the future.

Many banks are now beginning to invest in long-term sustainable financing commitments Because of the data they have on their customer's spending habits, they can now target suitable customers to invest in their projects, as well. This will also increase the level of investment in sustainable projects. The bank will create a better community feeling for them and increase their customer loyalty.

Banks play a huge in reducing our carbon footprint

In conclusion, the role of the banks cannot be underestimated in the attempt to make the world more sustainable. With their cooperation, they can help finance green projects that help reduce our carbon footprint. We, the customer, have to put pressure on the banks to be environmentally proactive. The interaction between the customer and the banks will crucial to long-term sustainability. 



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