Pandemic hamstrings sustainability efforts of UK banks

Many UK banks are pushing sustainability down the agenda due to Covid-19, according to a new report. Experts subsequently warn that they could be set to lose customers, if they cannot meet their demands for acting with purpose.

The pandemic-induced economic crisis flattened interest rates, dampened spending and pushed credit losses through the roof – all of which is set to cost the global banking sector trillions of dollars in the near future. The result of this crisis is that sustainability efforts from many banks have stalled during the pandemic.

One recent study from Mazars found that sustainable culture and governance was most advanced in the banking sectors of France and the UK, followed by the Americas, however, while a new report has theoretically backed this up, the paper from digital transformation consultancy Mobiquity suggests that British institutions are still not fully committed to change. While things were worse elsewhere, one of the headline findings from a poll of 300 banking executives in the UK, Germany and Netherlands was that less than one-third of UK banks said sustainability was still a top concern for them.

Awareness of sustainability challenges among banking executives is high at present. Majorities of 78% in the UK and 91% in the Netherlands said they view sustainability as an important part of their business strategy in some capacity. Despite the existential importance of sustainability – which most executives assert they are aware of – however, only 31% of UK executives said they thought it was a “top concern at board level.” This fell even lower to 28% in the Netherlands and 24% in Germany.

Additionally, even though there remains a high level of willingness among banks to engage with sustainability challenges, less than half of banking executives are planning sustainable measures as part of their business strategy. While 71% of UK respondents said they had sustainability reporting at board level, only 45% said they were planning for sustainable initiatives. In the UK this includes mitigating climate change risks through assessing their current and future client portfolio.

Highlighting why the lack of action is such an issue, Ben Caldecott, COP26 Strategy Advisor for Finance, UK Cabinet Office said, “Sustainable finance creates huge opportunities for the banking sector, and in addition to supporting clients transitions towards sustainability, banks will also need to become much more sustainable themselves, not only for their financed emissions, but for their own activities and operations. The banking sector is where the financial system and the real economy meets.”

“Banks need to develop comprehensive strategies, together with detailed plans for implementation tied to appropriate resourcing and levels of accountability to ensure implementation.”

Considering why banks were not more forthcoming with sustainability initiatives, Mobiquityfound three main issues. While 33% of respondents in the Netherlands blamed a lack of cohesive ESG strategy, and 29% in Germany pointed to a lack of knowledge in the market and how to drive sustainability, close to one-third of UK executives pointed to the pandemic.

In the end, 31% of British banks cited Covid-19 and industry demands as holding sustainability efforts back. Whether or not that holds weight with their customers remains to be seen, however, as consumers increasingly look for businesses they engage with to act with purpose, as well as chase profit.

Matthew Williamson, Mobiquity’s Vice President of Global Financial Services, noted, “Most UK banks are not doing enough to be sustainable. Not only will this have a large impact on the environment, but in the future, they will find that attracting customers and retaining talent will become difficult. Customers may decide to vote with their feet and investors may pressure banks to improve their performance on sustainability as it becomes a key business metric.”

“There is a golden opportunity therefore to build on existing awareness around digital and its role in creating sustainable banking outcomes, by embracing digital innovation that lays the foundation for achieving an eco-conscience across banking and financial services.”