Is Sustainability on the Brink in Banking? (Probably Not, But Survey Shows Downtrend)

In his 2016 commencement speech at Rutgers University, former President Barack Obama stated that “Progress doesn’t travel in a straight line. It zigs and zags in fits and starts.”

While he was referring to progress in America overall, the same philosophy could apply to corporate sustainability.

Businesses have come a long way from the days of corporate social responsibility (CSR) as a feel-good PR move…if they even considered sustainability issues at all. Many have evolved to see sustainability as a strategic priority.

But recently, the pendulum has swung back in some ways.

In a 2022 survey of banking executives across the U.S., U.K., the Netherlands, and Australia by digital consultancy Mobiquity, 97% “said sustainability is an important part of their business strategy.” This year, only 70% said the same.

This decline shows up at the board level too. Last year, 89% of executives said their bank has a board representative for overseeing sustainability strategy, while only 67% do this year.

Altogether, only 26% of respondents in 2023 said sustainable banking is a top board-level concern vs. 41% last year. And that’s translating into less concrete action.

In the U.S. last year, over 80% of executives said their banks are “taking steps to foster sustainable behaviors and outcomes,” but that plummeted by more than half this year.

New Headwinds

What’s causing banks to shy away from sustainability?

Amidst macroeconomic headwinds, banks have been focusing more on immediate results, particularly in terms of keeping a healthy bottom line, causing sustainability to move to the back burner, says Peter-Jan van de Venn, VP, Global Digital Banking at Hexaware Mobiquity. (Mobiquity is part of Hexaware.)

Part of the sustainability de-emphasis might also be explained by external pressure from stakeholders, such as consumer doubt around some brands’ sustainability sincerity. In fact, 55% of global consumers are skeptical of brands’ sustainability claims, finds YouGov.

Banks are likely facing similar circumstances. 

“This is why it is important that they create a culture of thinking that sustainability is not just a necessity because of regulation, or because it’s important to the bank’s brand, but make it part of the bank's culture,” says van de Venn.

Doing so can help banks tap into the long-term advantages of sustainability.

“Accelerated innovation” and “cost savings through innovative digital products & services” are  the top benefits of sustainable banking among this year’s survey respondents.

“The great thing is that there are opportunities to create a win-win situation because sustainability efforts will also help banks to reduce costs, for instance, and we see more and more demand for sustainable banking products too, which will help banks to actually monetize sustainability,” says van de Venn.

Financing the global transition to net zero, for example, will require a minimum of $4.4 trillion per year, according to McKinsey.

“Banks are on the front line to provide financing and advisory support for a wide range of opportunities,” notes McKinsey.

The Future of Sustainable Banking

While this year’s Mobiquity survey results show that sustainability efforts have taken a step backward in the banking sector, that doesn’t mean sustainability/climate change efforts will permanently recede.

Instead, sustainable banks may come to realize that having lower operating expenses, for example, due to climate-related efforts like improving energy efficiency at branches or reducing business travel to cut carbon emissions, can help insulate them from some of the macroeconomic headwinds they’re now facing.

Plus, sustainable finance and sustainable investment solutions could potentially help banks and other financial institutions diversify and grow their revenue.

Moreover, banks may be able to find success in the future by focusing both on their own carbon footprint as well as helping customers meet their own sustainability goals, says van de Venn.

“For instance, they can offer reduced interest rates or additional financing for energy-efficient home improvements, such as insulation or smart energy systems,” he adds. “By monetizing sustainability this way, banks align their purpose of helping customers manage their finances while contributing to a greener future.”

Disclosure: Our parent company, JournoContent LLC, has clients involved in sustainability-related areas, among others. The owner of Carbon Neutral Copy, Jacob (Jake) Safane, has investments in sustainability-related companies, among others.

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