Making Sustainability a Common Practice

Many financial institutions lay claim to sustainability with Going-Green objectives as an element of their culture as well as an on-going commitment to their customers. But getting these intentions ingrained into a bank or credit union takes more than a press release. Sustainability as a widespread practice requires consistency, commitment, and action to genuinely support a green strategy.

So how do bankers move forward on sustainability efforts?

The first step is to ensure your institution has developed a thorough Environmental, Sustainability and Governance (ESG) policy. Any significant effort in banking requires that stakeholders understand and then act upon plans.

Policies form the backbone of such plans. Bankpolicies.com defines a policy as a high-level overall plan that embraces the general goals and directives of a bank. This type of document, and the related subject matter, requires the approval of senior management and the board of directors.

What’s in an ESG policy?

An ESG policy should contain a statement of its overall purpose and identify to whom the document pertains (i.e., who is the audience – shareholders, employees, the Board of Directors, others?).

The environmental section of an ESG policy should address shared areas of sustainability and include:

• Energy efficiency and emissions
• Waste management and recycling
• Water usage
• Biodiversity
• Climate change and related risk management
• Customer impacts and offerings

The geography of an institution will impact the focus and precise content of the plan. For example, an institution in the Great Lakes area will have a slightly different take on water use than a bank headquartered in the Southwest.

Why does sustainability make sense?

Perhaps the most important elements of an ESG plan are the reasons for doing it. Of course, sound stewardship of the planet is the primary motive, which aligns with the viewpoints of – and makes your institution more attractive to – younger employees and customers.

And the fact that sustainability makes for sound business opportunities provides another rationale. Recent FIS research indicates banks see real opportunities in ESG and are investing in ESG products and services.

In a survey of financial institution executives, they indicate:

• 68% of respondents feel ESG offers an opportunity to improve competitiveness
• 65% are giving customers more transparency to ESG scores
• 60% of respondents feel ESG offers an opportunity to attract increased investment

How to engage stakeholders

With an ESG plan firmly documented and sanctioned by participating senior management, the next step becomes underpinning the policy and the sustainability approaches within and throughout an organization.
Training, education, and repetition help to embed the ESG plan throughout the organization. Leadership should leverage the traditional sources of training within the organization, from online courses to classroom instruction. Supervisors should ensure ESG policy content is read and understood, with periodic online quizzes and individual signoffs on the content.

Executives should also call attention to your organization’s sustainability plans in their regular staff and/or townhall meetings. It also helps to recognize individuals who have or are putting policies into practice on a consistent basis.

Learn from the best

Sustainability cannot thrive in a vacuum. The greenest of financial institutions learn from others, and often do so outside of the financial services industry. Group thinking among bankers can limit innovation in sustainability and restrict research findings on best practices.

However, this problem is easily solved by broadening the scope and seeking examples outside your industry. While it may seem counterintuitive, your greatest discoveries may come from a business in an entirely different field such as petroleum, hospitality, or the telecommunications industry.

Supporting ESG in customers

Beyond an internal focus, financial institutions are uniquely positioned to help others achieve their own ESG goals. Green finance initiatives can offer powerful incentives.

• A recent BAI article yields one example of green finance in action: assisting with solar panel installation, which many homeowners and business owners are now embracing across the U.S. Using various data sources, the energy yield of solar panels in a specific location can be inferred. When combined with a customer’s finances, accessed with consent from the customer’s bank, a solar company can use the data to provide financing options. The bank gets to provide a “green loan” with a low chance of default.

• Another example demonstrating a clear commitment to both giving back and sustainability is Amalgamated Bank. As a Fossil Free certified institution, Amalgamated Bank has pledged not to invest in fossil fuels projects. According to the bank's website, 24% of its lending is solely focused on climate protection and property-assessed clean energy financing.

These and other sustainable actions all start with an ESG strategy driven by a comprehensive ESG policy. Going green makes good sense both for the business of banking and for the planet’s long-term future.