The ever-present risks from climate change have made sustainability a key topic for financial institutions. Companies have historically driven financial, security, and agility benefits through the cloud, but there is also clear ESG benefits to taking a cloud-first approach. During a recent panel discussion with colleagues, and with Microsoft’s EMEA Sustainability Specialist Natalie Pullin, we explored how financial institutions can leverage the cloud and managed services on their journey to net zero.

It's clear from the discussions at COP26 that sustainability is a global problem that everyone must come together to solve. No-one can address the issues in isolation, but collectively we can achieve a lot. So, what can tech firms, fintechs and financial services organisations be doing to help support long term sustainability? Along with our ESG-focussed hackathon, which is being supported by Finextra, our panel identified several calls to action for the industry as follows:

1.       Support the circular economy and leverage green finance

We’re already seeing some great examples of the circular economy in action, for example with initiatives in Europe like that of Celsa Group to create green steel by recycling ferrous scrap. Other initiatives are also underway to produce steel with green hydrogen, emitting 95% less carbon than with coal. Although these methods are more expensive today, many customers will be willing to pay a premium. If financial institutions can come together to raise green finance and offer loans at a lower interest rate for those making greener choices, it can bring down the costs of green products, making them more competitive and driving further investment in sustainable initiatives.  

2.       Invest in sustainable cloud technology

The role of the cloud in reducing energy usage is widely understood: not only are fewer servers used, but they are often renewably powered and cooled more efficiently. It’s imperative for financial services firms to reduce their carbon footprint by accelerating their transition to the cloud and their use of managed services. In the process, it’s also essential to consider the 3 ‘S’s today in selecting a cloud provider. As well as Security and Scalability, there’s now a focus on Sustainability. All cloud providers are committed to achieving a high overall greenness score. Taking Microsoft as an example, the company has huge teams devoted to optimising the energy efficiency of its data centres, reducing carbon and moving to renewable energy sources. Microsoft was carbon neutral by 2012 and aims to be carbon negative by 2030. In terms of the social aspect of ESG and the cloud, there are also benefits to be had by employees of financial institutions as they outsource mission-critical tasks to specialist cloud providers. This frees up internal IT resources to focus more on innovation and growth strategies, which can create a variety of business benefits for the firm, including higher profitability as well as talent retention and attraction.

3.       Take a joined-up, transparent approach

All players across the financial services industry need to act holistically in taking a more integrated approach to sustainability. This means looking closely at the partners you work with across your entire supply chain to ensure you’re aligned on both values and ethics as well as your sustainability objectives. Microsoft, for example, is working with its top 400 suppliers to help them decarbonise their businesses, and to report on the metric tonnes of carbon saved. Working together, it’s important to exercise care and transparency in the data reported to avoid potential double counting. Indeed, there’s still a need for consistent metrics to be agreed for measuring and monitoring ESG to ensure transparency in reporting and the avoidance of greenwashing.

Essentially, a fundamental re-think is required by everyone across the industry on the way we do business and the impact on the environment. Collaboration is vital as documented in the last and perhaps the most important UN Sustainable Development Goal (Partnership for the Goals). Unless governments, corporates and individuals are proactive in addressing environmental and sustainability challenges, our existence in this world is at risk.

4.       Join our upcoming hackathon: help drive innovation in sustainability

Finastra’s upcoming hackathon, supported by Finextra, includes a focus on sustainable and inclusive finance. We’re inviting participants to focus on concepts such as innovations in green finance, the circular economy, and in solving environmental challenges, alongside ensuring fairness and equality of access to finance for everyone. Sustainable initiatives can make a real difference if we come together and create the right momentum behind them. Join us at Hack to the Future 4. The virtual event kicked off on 8 March and runs to 10 April.