In the panel ‘Sustainable finance: Assessing shades of green across payments and banking’, hosted by Finextra’s own Madhvi Mavadiya, speakers explored how the European banking landscape is adopting sustainable strategies.
Panelists included Ines Alonso Rodriguez, executive director of Advisory GTB Global at BBVA, Andrea Giuliani, head of payment solutions at NTT Data Italia, Stephen King, vice president of sustainability solutions at Visa, and Ainsley Ward, vice president of payments solutions at CGI.
King opened the conversation by saying that sustainability is an economic and industrial shift, significant in size and speed, meaning that there will be plenty of opportunities for disruption. He added that the consumers are trying to express their values for how they shop at an increasing rate, and companies are facing regulation or an opportunity to differentiate themselves in the public eye.
Ward mentioned that surveys conducted by CGI found that banks list sustainability as a top priority, but it should have been a priority a decade ago as well. The quicker institutions move on initiatives and make the change, the easier it will be to put the brake on global climate issues, however gathering data and reporting correctly is also an issue in the banking space.
On the regulations that banks and organisations are currently facing, Ward comments on how there is multiple layers of regulation: “There has been a lot of local regulation over the years because we have different problems in different areas of Europe. We have a certification is going on in Spain, we have large amounts of water where I am in Scotland, we have to deal with large amounts of wind and we are looking to turn that into electricity. What is coming next are a number of pieces. If you look at the DORA, which is the resiliency regulation, and CSRD which is environmental reporting regulation, things are about to get interesting. We are in that phase where we will transition from regulation and taking over from just best practice and third party certifications.”
There are both innovation and revenue opportunities when it comes to engaging in sustainable practice; if companies do not embed sustainability into their operations there will be significant cost involved.
King pointed out that sustainable items are often more expensive as they are longer lasting and better quality, but reiterated Giuliani’s point that sustainable products must be inclusive and available to all institutions.
Ward posited that sustainability does not need to cost more money, and that it can go hand in hand with modernisation. As an example, he cited that work from home and hybrid working environments that have become more popular amongst companies post-pandemic demonstrates how businesses can modernise and cut emissions.
Commenting on the role of a system integrator, Giuliani outlined the two ways that NTT Data is working towards sustainability: “We are going in two different directions. The first one is sustainability of IT, and the second one is sustainability by doing IT. In the first one we redesign IT services to be as sustainable as possible, and in the second we act on how sustainability can support and accelerate customer experience. If you think back to two to three years ago, payments and sustainability were two different topics, and what we are seeing today is that the payments and sustainability have an overlap.”
Giuliani highlighted main points for implementing and integrating sustainability on all fronts: to focus on measuring data accurately and regularly, to universally standardise regulation, and to ensure sustainable products are accessible to all organisations.
King emphasised the need for sustainable choice in payments systems: “Most of what we hear on the customer side in particular, is the lack of sustained choice. Where can they exhibit sustainability, what can they do, and where do they navigate to get that? Services are popping up such as climate friendly pledge marketplaces, ratings on certain travel sites, but they are searching and seeking trustworthy people to help them navigate because it's not easy. Again, it's not to say for everyone either, but for the ones that are seeking that, how can they find a trusted source to help them navigate to the decisions that are made in things like how they're living, how they move, how they eat, and everything else they buy?”
Rodriguez outlined the differences between scope emissions: Scope 1 emissions are what the companies control, Scope 2 emissions is from electricity purchases, and Scope 3 are indirect emissions caused by stakeholders such as clients, employees, and suppliers. To achieve Net Zero, all scopes must be taken account of, but the problem lies in that many companies do not have all three scopes included in their reporting and data measurements and therefore are not in their sustainability agendas.
She added: “Companies are worried about compliance sustainability targets for which they need the collaboration of the rest of stakeholders. Those sustainable assignments has shifted sustainability into climate change and the reduction and measurement of Scope 3 emissions, because companies need to control the value chain in order to comply with regulations and the reporting requirements.”
Rodriguez mentioned that there is a butterfly effect that takes place once financial institutions enact sustainability practices, that it leads their stakeholders to do the same and create a sustainable ecosystem.
Ward closed by noting the mindset towards sustainability in the banking sector: “We are in the business is towards economics and risk management, so we have to talk in that language from the perspective of sustainability. We have to transform the way that we are doing business cases so we always make these considerations. We have to show our internal organisation how to be advocates for sustainable practices in everything that our organisation. At CGI we are hoping to take our partners on that same journey and we are doing it in a way that they understand profitability is not necessarily impacted by taking a sustainable route. You can do things that are smart and good for the environment, and you can make money at the same time. We have to do this with an eye for profitability, but sustainability at the heart.”
Overall, the panellists explored how financial institutions are prioritising sustainable initiatives and what strategies they are employing to become greener in future years. They concluded that sustainability is and should be a top priority within every aspects of an institution, and that it provides a big opportunity for advancement. The journey towards Net Zero and becoming sustainable institutions will be long and not without obstacles, but is essential for companies to undergo. The session advised financial institutions start small with sustainable actions and then grow their practices as they progress into more environmentally friendly institutions.