One challenge in getting organisations behind the green agenda is that many executives view the costs involved in making their businesses more sustainable with scepticism. Historically, there has been resistance from traditional thinkers who see sustainability as a passing trend.
However, the data tells a different story. We are in the midst of a climate crisis, and it is everyone’s responsibility to contribute. Regulatory bodies are recognising this; 70% of banks and regulators now see climate change as a major risk to financial stability. As such, financial institutions must ensure their business models are sustainable, and this makes sense for many reasons.
What Are the Benefits?
There are significant advantages to ensuring financial firms have minimal impact on the environment. While saving the planet is the primary goal, there are direct benefits to the firms themselves:
- Sustainable Business Models: A sustainable business is future-proof. Banks, while adhering to regulatory mandates, also meet the expectations of stakeholders with a focus on ESG (Environmental, Social, Governance). It’s in everyone’s interest – customers, employees, and investors – to build a company that is sustainable, growing, and profitable.
- Better Financial Performance and Attractive Investments: The ESG sector has grown significantly, even during downturns. Previously dismissed as less profitable, ESG-rated funds outperformed the S&P 500 from March 2020 to March 2021. Investors now demand that their money be invested in companies with strong sustainability prospects, societal contributions, and good governance.
- Revenue Generation: Climate change challenges present opportunities for new services. For instance, many banks have developed green mortgages, offering customers additional loans to upgrade to eco-friendly home systems. This not only helps customers become more sustainable but also impacts the sustainability of the banks’ business models.
Sustainability initiatives are clearly beneficial for banks as well. Some advantages are quantifiable, such as increased investment inflows and revenue generation, while others are more intrinsic, like the reputational benefits of being green. It is clear that banks that embrace sustainability and contribute positively to society will thrive in the future.
To learn more about the P2 House of Green, our model for building climate change programmes within organisations, please contact us today by emailing.
