Banks are increasing their investment in green products and services, spurred on by demand from todayâs environmentally conscious consumer. In every industry â from automotive and aerospace to consumer packaged goods â there is pressure on companies to reduce their carbon footprint and transition towards green new products.
The consequence for those that donât keep pace with change and innovation? Consumers are less brand loyal than ever; in an age disparagingly dubbed the era of âcancel cultureâ, ethical consumers will switch brands in a heartbeat and leave behind those failing to react.
For legacy banks, that provides a serious challenge. While continuing to improve the functionality and usability that they offer to consumers, banks must also now take sustainability into consideration and launch products that appeal to mindful consumers. Here, weâve picked out a few of the best examples of sustainable banking â and we ask whether consumers are willing to pay to make it happen.
Demand for sustainable banking is becoming universal â but research from YouGov has shown that some countries are ahead of others when it comes to their willingness to pay extra for environmental initiatives.
Percentage of consumers willing to spend more on sustainable products
Source: YouGov
Yet despite the overwhelming appetite for green products, environmental technology company GreenPrint found that almost three-quarters (74%) of Americans were unsure how to identify products that are truly better for the environment. The study also found a large degree of mistrust about companiesâ environmental claims. A majority of people have doubts when companies say they are environmentally friendly, with over half of Americans âneverâ or âonly sometimesâ believing such claims.
For banks and fintechs, that means three separate hurdles: on top of explaining to consumers what green finance looks like, they must be transparent about exactly what they are doing to lower their carbon footprint and reduce their environmental impact â particularly when they make claims about caring for the planet or building for the future. All of this needs to be balanced against the need to keep everyday banking open and accessible for all, including the most vulnerable in society.
Digital transformation in banking provides so many opportunities to mainstream banks â and there are plenty of examples of successful environmental initiatives for any institution thatâs still lagging behind. Here weâve collected some of our favourites to highlight how it can be done.
Let consumers track the ‘green-ness’ of their spending
As consumers become more ethical, there is a growing demand for products and services that allow them to track their spending and show them ways that they can become a more sustainable consumer. Many banking apps and fintechs already show consumers a breakdown of their spending, perhaps categorising payments into various groups and allowing the user to set up a number of financial objectives like saving for their next holiday.
With an emerging focus on âgreenwashingâ, consumers will want to see how their spending stacks up and which suppliers they can trust. Banks should introduce more sustainability reporting into their retail banking and be brutally honest with consumers about brands that just donât stack up.
The result is a real-time sustainability report that challenges eco-conscious consumers to reduce their impact on the planet. Last month, British bank NatWest launched a new carbon footprint tracking tool for its consumers which shows the CO2 emissions associated with their daily spending. Users will be able to log their commitments and behavioural changes, encouraging them to take up more environmentally friendly habits.
Initial findings suggest that such apps allow consumers to change their spending, not just monitor it: a pilot programme for NatWestâs carbon tracking app showed an average saving of approximately 11kg of CO2 emissions per user per month.
Launch carbon-neutral mortgages
Like any financial service or product, mortgages have a carbon footprint. Most of this footprint comes from physical operations â either the energy and resources required to run offices or the copious amount of paperwork that goes into processing a mortgage. Thankfully, itâs easier than ever to reduce the impact that these operations have by switching to renewable energy, reducing the amount of resources required, or by offsetting a companyâs carbon footprint.
The latter option should not be a substitute to actually reducing your carbon footprint or investing in new eco products that appeal to todayâs consumer.
Earlier this summer, Danske Bank became the first UK provider to launch a carbon-neutral mortgage. It is certified by the Carbon Trust, which estimates that the footprint of an average mortgage is equivalent to 96kg of C02 emissions â enough for a 250-mile car journey.
Aisling Press, Managing Director of Personal Banking at Danske Bank, says: âAt Danske Bank, weâre already carbon neutral in the heating and electricity we use in our branches and offices. So the mortgages weâll provide on greener homes wonât contribute to rising greenhouse gas emissions. Thatâs certified by the Carbon Trust.
âDomestic homes generate an estimated 15% of the UKâs greenhouse gas emissions, so improving the energy efficiency of our homes is crucial in the fight against climate change. As a leading mortgage lender, we have a responsibility to support customers who choose a greener home. Weâve therefore made the Carbon Neutral Mortgage our most competitively priced mortgage and launched a new cashback offer of up to ÂŁ2,000.â
Elsewhere in the UK, big banks like Barclays and NatWest offer better rates to consumers who buy an energy-efficient home while TSBâs Green Addition Borrowing mortgage range offers a better deal to consumers who want to make green home improvements.
Allow consumers to contribute at POS
As well as seeing the impact of their spending, retail customers want to know theyâre actively making a difference. For banks that want to introduce sustainable products for their consumers, partnering with some of the many fintechs who are excelling in this space could offer the answer.
The American unicorn has already received some impressive support: it lists Hollywood celebrities like Leonardo DiCaprio, Robert Downey Jr and Orlando Bloom as backers along with the co-founder of Ebay, Jeff Skoll.
Some digital challengers already offer the ability to round up purchases to the nearest dollar, allowing users to save small amounts at a time without actually having to set any money aside. Why not offer the same for sustainably minded consumers, too? Offering customers the chance to round up their purchase for reforestation projects or renewable energy will let them feel that they are making a positive contribution as they shop.
Go recyclable â cards included
Itâs a long time since banks and financial institutions first offered their customers the ability to go âpaperlessâ. 20 years ago it would have been unthinkable that banks would completely eliminate paper statements and written correspondence. In another 20 years â if that â it might be unthinkable that they would ever consider it in the first place.
Digital banking is an everyday norm for the vast majority of consumers, and big banks have taken enormous steps to reduce their paper consumption and digitise everything they do. But there is one last bastion of recyclability and renewability that banks must not forget â bank cards.
As consumers continue to see other products in their life switch to more recyclable packaging or renewable materials, they will expect the contents of their wallet to follow suit. In recent years, Triodos Bank, Starling and Mastercard have all launched sustainable debit or credit cards made from plant-derived, biodegradable or ocean-friendly materials.
For the time being, this generation of children is just beginning to learn about finance with GoHenry â but in a decade or two, theyâll be the ethical consumers choosing where, and with whom, to spend their money. Every bank will need to be ready for that.
