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Banking and financial services has far-reaching influence in shaping sustainability expectations and supporting clients on their sustainability journeys.

In recent years, the world has awakened to the ever more pressing imperative of sustainability, with climate change just one of a host of system environmental challenges, social responsibility, and ethical governance taking centre stage. Given its influential role in funding the global economy, the banking and financial services sector has a critical role to play in advancing the world's sustainability goals. 

With influence spanning across industries and markets and established businesses and start-ups alike, it can serve as a lynchpin for driving sustainable and ethical business practices and unlocking low-carbon innovation and entrepreneurship. By integrating environmental, social, and governance (ESG) factors into decision-making, offering sustainable financing solutions and proactively participating in climate risk management, the sector not only supports the financing and development of sustainable products, but also encourages businesses worldwide to embrace environmentally conscious and socially responsible practices and enables knowledge and advice to be shared across client networks. 

The banking and financial services sector holds profound influence, not only in setting sustainability expectations for its clients but also in leveraging trust to support their sustainability journeys. However, as this sector seeks to drive sustainability and address industry and client needs, it faces two significant challenges: ESG data strategies and technology emissions. This article explores these challenges and highlights how technology can be harnessed to address them effectively.

ESG Data Strategies: A Crucial Component

Sustainability is no longer a buzzword; it's a fundamental aspect of modern business. For banking and financial services institutions, this means not only adopting sustainable practices but also helping clients do the same. To facilitate this transition, banking and financial services organisations need robust ESG data strategies.

A recent Cognizant survey revealed that only 45% of banking and financial services professionals believe they can report timely, reliable data on sustainability performance. Furthermore, just 44% have access to analytical tools to generate insights for sustainability and operational improvements. Many are primarily using this data for reporting purposes only, missing out on valuable opportunities to drive meaningful and enduring change.

The complexity of the challenge intensifies when considering data related to supply chain emissions, referred to as Scope Three, and all the more so when a business factors in the impact of its investments, (often referred to as Category 15). Additionally, as the need to qualify, quantify and report on biodiversity impact grows, the data challenge, risk and opportunity grows commensurately. Banking and financial services institutions must adapt swiftly and transparently.

Technology greatly supports the business’ ability to tackle such challenges and to scale and accelerate these responses. AI, machine learning, advanced analytics, and automation technologies enable banking and financial services organisations to collect data seamlessly from across their enterprise and value chain. These technologies can identify anomalies and trends more efficiently and pave the way for more actionable insights and more robust future-fit decision making. With the right tools, banking and financial services institutions can not only meet reporting requirements more effectively and efficiently, but also proactively steer their own clients towards better performance and higher value from sustainability data management and reporting.

The Role of Technology in Mitigating Footprint

While banking and financial services institutions champion sustainability, they must also address their own environmental impact. The banking and financial services sector surprisingly ranks as the second-largest contributor to total enterprise technology emissions. In fact, technology accounts for a staggering 40% of banking and financial services Scope 2 emissions.

However, the sector recognizes the power of technology to drive positive change. The survey indicates that 70% of banking and financial services professionals agree that progress in digital transformation will positively impact sustainability. Furthermore, the same percentage believes that next-generation technologies will make it easier to achieve their sustainability goals.

To tackle technology emissions, banking and financial services institutions can utilise various technologies and expertise to isolate and understand their technology emissions profile across any number of categories, and accurately forecast how this is likely to evolve. This understanding allows them to target and implement cost-effective mitigation strategies, reducing their overall carbon footprint.

Influencing the future

Banking and financial services is a vital sector with far-reaching and profound influence across various industries. Its role in shaping sustainability expectations and supporting clients on their sustainability journeys is undeniable. However, the sector faces significant but surmountable challenges.

Technology, including AI, machine learning, advanced analytics, and automation, provides a powerful toolkit to overcome these challenges. By enhancing ESG data strategies and mitigating technology emissions, banking and financial services institutions can not only drive their sustainability ambitions but also lead authentically and demonstrate the means to achieve a more sustainable future. That authenticity coupled with a visible commitment to and progress towards in-house and value-chain sustainability is vital if the business wishes to successfully launch ESG focussed products and services to a market in great need of them.

As technology and professional services businesses, we stand ready to assist BFS institutions in harnessing the power of technology to navigate these challenges and advance sustainability in the sector. Together, we can pave the way for a more sustainable and prosperous future for all.

Philip Smith

Global Head, Sustainability Advisory Practice, Cognizant

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