By Kalliopi Chioti, Chief Environmental, Societal and Governance Officer, Temenos

While this year’s COP27 has concluded, the urgency and the need to continue to turn pledges and commitments into action, must remain. 

Banks have much to contribute. Every year the banking sector produces around 6.5 billion cards worldwide, churning out 136,500 metric tons of carbon dioxide in the process. That’s the equivalent of flying from New York to Sydney over 80,000 times. 

However, banking’s challenge is not simply to reduce the carbon footprint of their value chain, but it must also evidence it with hard data. 

Cutting carbon

Technology, specifically cloud, has a central role to play in this process. Most banks are already using cloud to varying extents, however, there is scope for greater use. Migrating infrastructure and software from private data centres to public cloud hyperscalers means less hardware and floor space, less IT staff leaving behind their own carbon footprints, and less electricity to run it all. Public cloud centres are increasingly built with energy efficiency as a priority, be it lighting, cooling, computer consumption or equipment degeneration. 

According to data from IDC, cloud computing is capable of reducing over 1 billion tonnes of CO2 over the next few years when compared with legacy IT systems. Microsoft, who Temenos partnered with at this year’s COP27 summit, estimates that businesses using their cloud infrastructure generate up to 98% lower carbon emissions than operating their own. This is backed up by data from IDC that suggests cloud computing is capable of reducing over 1 billion tonnes of CO2 over the next few years when compared with legacy IT systems. The more banks that lean on public cloud providers and the SaaS solutions that run on them, the more the sector generates green economies of scale.

Showing the evidence 

What’s also vital for banks is being able to measure their impact. This is not just a moral argument. Regulations are reaching a point at which publishing data against ESG targets will be legally mandated. In Europe, the European Central Bank (ECB) and the Bank of England have already launched supervisory climate risk stress tests to assess how prepared banks are for dealing with the shocks from climate risk. Meanwhile, initiatives like the UN-convened Net-Zero Banking Alliance (representing over 40% of global banking assets), the Glasgow Financial Alliance for Net Zero and ​​the Principles for Responsible Banking add to the clamour for banks to evidence their progress.

Banks must judge the technology and software they deploy not simply by their promise to reduce energy and emissions, but by their ability to prove it. Recognising this, Temenos has developed a carbon emissions calculator. It provides banks using the Temenos Banking Cloud with an actual record of their CO2 emissions. It is a comprehensive measurement, starting with consumption data from Microsoft Azure and including every aspect of a bank’s operation carried out via our platform.

Empowering everyone

Consumers are not passive bystanders to the climate agenda. They are informed, passionate, and active. Increasingly people are choosing banks that represent their values. A survey in the U.K by Deloitte found that three out of every five (61%) banking customers say they want their banking provider to “do more to create a positive, social and environmental impact”. Moreover, EY has found that 84% of consumers consider sustainability to be important when making purchasing decisions. Banks are increasingly recognising this by enabling their customers to track their own carbon footprint, enabling customers to take control and monitor their carbon impact. 

With open banking, data can be shared from banks, and with banks. That gives banks plenty of new ways to please their environmentally conscious customers. They can report to each customer on the carbon impact of their spending, give them options to offset these carbon payments, reward them for transactions that positively contribute to sustainability, and offer them investment vehicles that align to their values. 

ESG Investing

Banks and wealth management firms must also recognise the value of technology in offering data backed ESG investments. According to analysis by Bloomberg, global ESG assets under management are on track to exceed $53 trillion by 2025, representing more than a third of the projected total. To do so requires data capture and management software – not only to measure environmental figures, but also diversity, gender equality and corporate governance factors. Bank and wealth management firms need Artificial Intelligence (AI) to filter, score and model opportunities and portfolios. They need software that can deliver highly personalised customer experiences. It must be secure and compliant, and finally, it must be profitable too, for both customers and the bank.

All industries must recognise their climate impact, and the banking sector has a large role to play. Banks must recognise the necessity to reduce their carbon footprint and understand the value that comes with incorporating new low-carbon technologies into their infrastructure and empowering their customers to move towards a net-zero world.