# How is green finance reshaping the banking industry? Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2021-10-18 Category: BANKING Category URL: https://financedigest.com/category/banking Meta Title: Sustainability Revolution in Banking Sector: Opportunities Meta Description: Explore how the banking industry is embracing sustainable practices to deepen customer relationships and innovate for a greener future. URL: https://financedigest.com/how-is-green-finance-reshaping-the-banking-industryhtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/graphicstock-planet-earth-on-palmelements-of-this-image-furnished-by-nasasaqqivxsx-sbi-301984974-1736837547403-compressed.jpg) _By_ **_Elina Mattila,_** _Executive Director Mobey Forum_ Having already swept through numerous industries around the world, the sustainability revolution is now taking the banking sector by storm. Each day brings new announcements from banks, fintechs and solution providers. The sustainability trend presents the [banking industry](https://www.financedigest.com/the-survival-of-the-banking-industry.html "THE SURVIVAL OF THE BANKING INDUSTRY") with unique opportunities to deepen customer relationships and, at the same time, is challenging players to innovate through the development of new products and services that address specific environmental goals. **What and why?** From utilities to manufacturing, numerous other [industries have long been responding to consumer](https://www.financedigest.com/navigating-consumer-data-in-the-finance-industry.html "NAVIGATING CONSUMER DATA IN THE FINANCE INDUSTRY") demand for greener products. Now attentions have [turned to the world of finance](https://www.financedigest.com/how-finance-leaders-can-turn-the-inflation-challenge-into-opportunity.html "How finance leaders can turn the inflation challenge into opportunity"). [According to research by Deloitte](https://www2.deloitte.com/uk/en/pages/press-releases/articles/making-an-impact-esg-factors-are-a-priority-for-customers-when-choosing-a-bank.html), three out of every five banking customers in the U.K. said they wished their banking provider did more to “create a positive, social and environmental impact”. The industry is right to respond. **Getting closer to the customer** As environmental impact becomes a core consideration for more consumers, both [fintechs and established banks](https://www.financedigest.com/fintech-v-the-banks-uneasy-bedfellows-or-a-match-made-in-heaven.html "FinTech v the Banks: Uneasy Bedfellows or a Match Made in Heaven?") have started to appreciate the power of reflecting shared values. New [fintechs that put sustainability at the center of their business](https://www.financedigest.com/business-finance-the-fintech-evolution.html "Business finance: the fintech evolution") models are now emerging. Incumbent [banks are also launching new products to meet](https://www.financedigest.com/banking-stability-worries-go-behind-closed-doors-at-imf-world-bank-meetings.html "Banking stability worries go behind closed doors at IMF-World Bank meetings") demand. While giving back to the planet is a [central motivator for banks](https://www.financedigest.com/inflation-trumps-financial-risks-as-central-bank-tightening-set-to-continue.html "Inflation trumps financial risks as central bank tightening set to continue") to go green, so is the chance to get closer to their customers. At one of Mobey Forum’s [recent Member Meetings](https://www.financedigest.com/the-recent-bank-of-england-meeting-the-biggest-rate-hike-recession-warning-and-the-fallout.html "The recent Bank of England meeting, the biggest rate hike, recession warning and the fallout"), we were joined by a guest speaker from Tomorrow Bank – a German neobank focused on sustainability – who presented data that showed how shared values have created trust and engagement with their customers. Average [customer deposits at Tomorrow Bank](https://www.financedigest.com/communicating-with-the-customer-is-the-future-of-mobile-banking.html "Communicating with the customer is the future of mobile banking"), for example, are four times higher compared to the industry standard for a neobank. What’s more, over 80% of their [customers follow them on social media](https://www.financedigest.com/10-tips-to-help-with-your-social-media-customer-care.html "10 TIPS TO HELP WITH YOUR SOCIAL MEDIA CUSTOMER CARE"). These are social [engagement metrics that many banks](https://www.financedigest.com/how-conversational-commerce-can-help-banks-engage-with-millennials.html "How conversational commerce can help banks engage with Millennials") can only dream about. **[Green bonds](https://www.financedigest.com/green-bonds-are-set-to-drive-corporate-esg-debt-out-of-slump-in-2023-barclays.html "Green bonds are set to drive corporate ESG debt out of slump in 2023 -Barclays") and zero emissions are high on the agenda** What green finance products are available? Green bonds and investment instruments are already [offered by most major banks](https://www.financedigest.com/first-abu-dhabi-bank-reiterates-not-eyeing-offer-for-standard-chartered.html "First Abu Dhabi Bank reiterates not eyeing offer for Standard Chartered"). Both Nordea and NatWest, for example, have launched carbon calculators that [estimate the carbon footprint of their customers](https://www.financedigest.com/yum-beats-sales-estimates-as-customers-flock-to-kfc-taco-bell-deals.html "Yum beats sales estimates as customers flock to KFC, Taco Bell deals") based on spending data, while BBVA and HSBC are offering payment cards that are made from recycled materials. Elsewhere, [banks like Barclays and ABN Amro are offering better mortgage rates to customers](https://www.financedigest.com/how-will-open-banking-impact-the-customer-experience.html "How will Open Banking impact the customer experience?") building environmentally friendly houses. Danskebank is also [offering a ‘green mortgage’](https://www.financedigest.com/britain-urges-banks-to-offer-mortgage-flexibility-in-cost-of-living-crisis.html "Britain urges banks to offer mortgage flexibility in cost-of-living crisis") that offsets its own carbon footprint. More favourable terms for sustainable companies will likely be available soon, as lending to low-carbon corporate [customers poses a lower risk to banks](https://www.financedigest.com/visionary-banks-fight-the-blur-hybrid-computing-architecture-brings-a-faster-sharper-customer-experience.html "Visionary banks fight “the blur”: Hybrid computing architecture brings a faster, sharper customer experience"). It’s not just product and [service development](https://www.financedigest.com/financial-services-technology-development-in-2023.html "Financial Services technology development in 2023") either. [Banks are really](https://www.financedigest.com/be-really-really-careful-on-inflation-bank-of-englands-haskel.html "Be ‘really, really careful’ on inflation – Bank of England’s Haskel") starting to take sustainability seriously. A great demonstration of this made the news in Spring, when it was announced that an industry-led and UN-convened Net Zero Financial Alliance, comprising of 43 banks from 23 countries, is going to be established with the sole aim of accelerating the transition to net zero emissions by 2050. **Key challenges limiting further innovation?** Setting up [green and sustainable](https://www.financedigest.com/green-cloud-one-way-your-company-can-commit-to-sustainability.html "Green Cloud: one way your company can commit to sustainability") initiatives in banks, however, requires the right mindset and corporate culture. [Banks’ senior management teams need](https://www.financedigest.com/britains-digital-banks-need-support-amid-banking-turmoil-trade-body.html "Britain’s digital banks need support amid banking turmoil – trade body") good awareness and understanding of the topic, particularly with more pressure mounting from the regulators. The EU is currently examining how to make [sustainability considerations an integral part of its financial](https://www.financedigest.com/cobots-in-the-financial-workplace-reducing-costs-attracting-talent-and-enhancing-sustainability.html "Cobots in the financial workplace: Reducing costs, attracting talent and enhancing sustainability") policy. This includes channelling private investment towards a climate-neutral economy, creating an EU-wide classification system for sustainable activities and ensuring that financial [services](https://www.financedigest.com/73-of-employees-in-the-banking-and-financial-services-industries-are-looking-for-better-physical-and-mental-wellbeing-support-in-the-workplace.html "73% of employees in the banking and financial services industries are looking for better physical and mental wellbeing support in the workplace") providers and financial advisers deliver on customers’ sustainability wishes. With that in mind, it should be noted that customer interest levels do differ. According to a number of our member [banks that have already launched](https://www.financedigest.com/danich-local-and-regional-banks-launch-mobile-wallet-powered-by-nets-new-hce-and-tokenisation-platform.html "DANICH LOCAL AND REGIONAL BANKS LAUNCH MOBILE WALLET POWERED BY NET’S NEW HCE AND TOKENISATION PLATFORM") sustainable products, some customer segments are highly enthused, while others are resistant and feel like their bank is imposing values on them. Convincing more customers to move away from their traditional [bank products and services](https://www.financedigest.com/20-billion-in-bank-service-fees-are-you-overpaying.html " Billion in Bank Service Fees: Are You Overpaying?") to more sustainable alternatives may not be a straightforward task, and could well backfire. Transformation is another hurdle. Innovation of new financial products that utilise data – such as carbon calculators – require [banks to have a modern approach to big data](https://www.financedigest.com/banks-struggle-to-harness-big-data.html "BANKS STRUGGLE TO HARNESS BIG DATA"). Progress is being made here though in the trading world, where accounting pioneers are [working to help stock markets](https://www.ft.com/content/2a405cf6-9592-4de2-960b-4c3e5d0df030) account for the impact that companies have on the  environment by incorporating this factor into financial statements. **The outlook is green** While these challenges persist, the sustainability trend in [banking is undoubtedly moving](https://www.financedigest.com/stock-pickers-reckon-its-time-to-move-on-from-central-banks.html "Stock pickers reckon it’s time to move on from central banks") from strength to strength. Over the next 12 months, we can expect to see more banks participating by creating [innovative green](https://www.financedigest.com/green-light-for-setsquareds-automotive-technology-innovators.html "Green light for SETsquared’s automotive technology innovators") solutions that both reduce their carbon footprint and help their customers live more sustainably. This is a welcome shift and a substantial win for banks, consumers and the planet. --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---