North American audiences are demanding sustainable corporate initiatives more than ever. Both large financial institutions as well as community banks and credit unions are responding to growing awareness to step up pro-environmental standards from various stakeholders including consumers, employees, investors, competitors, eco-system partners and government entities. Large banks such as American Express, Santander, and investment powerhouses such as BlackRock have sustainability as core goals of their investment strategies. Financial institutions run the risk of damaging their corporate public profile without embracing strong forward thinking environmental, social and corporate governance (ESG) policies.
According to 2021 Pew Research Data, a majority of Americans believe reducing climate effects is key to ensuring a sustainable planet for future generations. Close to 60% percentage of baby boomers believe the government and corporations should be addressing climate change more than they currently are. In Canada, climate issues are the top election issue for Canadian voters in 2021.
Young adults, who are more open to advancing climate change policies, are even more inclined to support sustainable business practices and to take personal initiatives to address climate change more than are their predecessors. Millennials lean towards renewable sources of energy and companies that support green initiatives in greater numbers. Millennials are increasing the pressure on their investments with roughly one-third often or exclusively investing in corporations that adopt strong ESG initiatives with clear goals communicated to their stakeholders. As top talent enters the workforce, more potential employees seek out companies with robust ESG programs as one part of their selection criteria.
Both U.S and Canadian banks and investment powerhouses are increasing environmental initiatives and creating competitive ESG marketplaces. In 2019, American Express announced zero corporate emissions since 2018, and were recognized as corporate leaders on climate action and sustainability by CDP Climate A List. Santander, with a large international presence, was declared the most sustainable bank by the Dow Jones Sustainability Index (DJSI) in 2019 due to its long-term commitment to responsible banking and ESG initiatives.
Citibank was the first to endorse the Principles of Responsible Banking, developed by banks to support the United Nations Environment Programme Initiative. In Canada, five of the largest banks have committed to Equatorial Principals, an international risk management framework specifically for financial institutions adopted by 37 countries geared toward mitigating environmental and social risks in decision making. Through ESG initiatives, large lenders are finding a positive correlation between social and environmentally sustainable objects and strong financial performance. This trend allows the industry to benefit positively from adoption and implementation of eco-friendly sustainable business practices.
North American financial institutions now experience more pressure from government agencies to account for and publish their sustainable goals and responses more than ever. While many of these policies are currently on a volunteer basis, pressure comes from multiple channels of accreditation. As sustainability becomes more important to the public at large, government entities and accreditation programmes are increasing pressure on the financial services industry to outline sustainable outcomes and meet ESG goals. The US Federal Reserve began requesting outlines from big lenders to outline what their loan books will look under certain climate change scenarios. While this initiative is not currently mandated, the request indicates the Federal Reserves vested interest in ensuring lenders are prepared to pivot and adapt to climate crisis-related scenarios such as wildfires, extreme weather events, flooding etc. With many NGO programs and market driven indices such as the DJSI, the pressure to create, implement and report ESG successfully initiatives is stronger than ever.
Therefore, what options do financial organisations, both large and small, have to create long-term policies and initiatives for a sustainable future?
The good news is that there are many small and large ways to adopt sustainable initiatives. To start, businesses can adopt and accelerate digital banking. Digital transformation within financial institutions, fueled by the COVID-19 crisis has dramatically increased in a short period. Digital banking provides multi-faceted solutions to create a greener business structure. By moving operations to cloud based solutions, businesses mitigate climate-associated costs such as electricity, which increases profit margin, a win for business and a win for the climate conservation. Simpler measures include encouraging clients to adopt digital statements and online activities that help decrease material costs while decreasing use of paper and associated activities of transport. Digital payments allows transactions to contribute to decreasing carbon output and increasing costs savings.
On cost efficient smaller scales, eco-friendly products are now available for banks across the globe and US to adopt and provide for clients. These include reclaimed ocean plastic cards, eco-friendly bio-based PLA cards as well as recycled PVC products for sustainable card issuance programs. By averting the numbers of non-organic plastics in the environment, institutions can help avoid plastic contamination in the environment. In years, roughly the equivalent of 150 Boeing 747’s worth of plastic are used globally to produce approximately 3.5 billion cards annually. By choosing sustainable card options, financial institutions and credit unions participate in mitigating the overall carbon output of the card payment industry. Institutions may also choose to participate in carbon-offset programs offered by Thales, where we collaborate with NGOs to offset carbon emissions in six areas around the globe, supporting your carbon neutral goals.
Shifts in payment card preferences are driving the current market. More issuers are moving to sustainable credit card options than ever before. By changing to sustainable card options, banks help divert plastic used in the estimated 3.5 billion cards made globally from the waste stream.
Another eco-friendly banking initiative is sustainable capital investments. Many large investment firms report more Americans requesting sustainable portfolio options, investment packages and other long-term sustainable investment options. By increasing the availability of sustainable investment options, more large banks are incorporating these investment strategies to meet ESG goals and respond to stakeholder pressure.
For more information on Thales eco-friendly products and carbon neutral programs, visit https://www.thalesgroup.com/en/markets/digital-identity-and-security/banking-payment/cards/eco-friendly-credit-card.
