A Fair Banking Framework for Net-Zero Can Be Best Achieved With Cloud-Based Solutions


By Heather Buchanan, CEO of Bankers for Net Zero 

For society to achieve its ambitious and imperative net-zero targets, the banking industry must begin implementing a strategy to help create an industry that can continue to operate in an environmentally stable way.  Banks have a crucial role to play in driving society towards carbon-neutral practices by reducing the direct impact of their carbon-intensive legacy systems and using their considerable influence to drive change with both individual and corporate customers

There is increasing pressure for multi-national financial organisations to collect more information and frequently report their Scope 1 Direct Emissions – resulting from their direct activities – as well as Scope 2 and 3 Indirect Emissions, which includes the emissions produced within their supply chain and from partnerships with providers. As time passes, banking organisations will be under increased scrutiny to implement meaningful structural change – both from a regulatory and consumer standpoint – towards an environmentally sustainable model. 

Last year we helped create the Bankers for Net-Zero – a coalition focused on mobilising financial institutions for climate action and collectively encouraging their stakeholders to set high ambitious commitments from the financial sector. Financial institutions must show leadership in forging a path that tackles the difficult issues that society will face in transitioning to net zero. The Net Zero initiative is designed to be used as a model for countries and their institutions around the world to follow. 

The framework includes eight targets, with specific priorities including ensuring banks finalise an announcement date to become carbon-neutral, carry out a transparent review to measure carbon levels, produce a clear strategic framework on how to drastically reduce companies’ fossil fuels and utilise emerging technologies to achieve net-zero. 

These changes can start now – ensuring established banking organisations move away from legacy systems and towards cloud-based solutions. Leading hyperscale companies, such as Amazon, IBM and Microsoft, are adopting new models such as Banking as Service, which will see an immediate and significant reduction in carbon footprints by up to 95 per cent and support them in achieving their ESG goals. These new models must be developed alongside products that can record real-time data needed to help improve a bank’s carbon measurements. By implementing these developments, innovation can help provide a single verifiable standard. 

To do this, banks must work with partners to help track their output. Banking technology providers, such as Temenos (see box out), are at the forefront of creating the apparatus to help gain accurate carbon insights. 

The Temenos Banking Cloud – running a public cloud infrastructure – provides up-to-date near-real-time carbon insights from using its products, tracking their progress towards reaching their sustainability targets. The company Flowe, a cloud-enabled digital bank built on green principles and powered by this software, is an example of what is achievable. Within the first six months of launching in 2020, it onboarded 600,000 customers and is growing at twice the rate of its nearest competitor. The company can grow sustainably, passing on benefits to customers for a cleaner, greener planet and a better society. Since its launch, Flowe has been able to maintain its overall carbon footprint close to zero, saving 90.81 per cent – 96.06 per cent in CO2e emissions compared to the on-premise alternative.  Impressive results and an example of what can be achieved. 

These moves are also likely to see greater interaction between banks and their customers. Consumers are not bystanders to the climate debate; and they are increasingly matching their money with their values and voting with their wallets. No more so than our younger generation, who are more inclined to judge banks by their ESG record and commitment to sustainable banking. Banks can’t afford to ignore the investors of the future. Today, a bank’s green credentials matter just as much as their financial services. Fall short on the former, and the latter may not even matter. 

This relationship between the bank and the customer is increasingly symbiotic. Institutions are now aware that their success is based on financial services that empower customers to take control of their own carbon footprint. By enabling individual insights through cloud banking, banks can build apps that give their customers tools to measure and manage the carbon impact of their spending. Tools to help them make more mindful spending decisions; reward them for their contributions toward sustainability; give them options to offset or reduce the carbon generated from a credit card payment; and make it easier for them to invest in sustainable funds, and to switch to less carbon-intensive energy providers.  

More than ever, innovation and regulation have a critical role in driving change in the banking industry and leading by example. The mission towards a modern banking technology transformation is critical to providing the industry with the products to enable it to transition to a low carbon global economy. Banks that have set themselves bold and ambitious targets to reach net-zero have little chance of getting there without combining a net-zero framework that will harness cloud-banking carbon-conscious solutions.  

About the Author

Author - HeatherHeather Buchanan is the CEO and co-founded the Bankers for Net Zero initiative which puts small business at the heart of the banking sector’s transition and has been announced as the first country chapter of the UN convened global Net Zero Banking Alliance, putting banking commitments into action in a local context.


The views expressed in this article are those of the authors and do not necessarily reflect the views or policies of The World Financial Review.