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Is automation key to ESG success in the banking and finance sector?

Is automation key to ESG success in the banking and finance sector? 41

Gavin Mee at UiPath introduces readers to automation and explains how the technology can bolster environmental, social and governance (ESG) efforts in the banking and finance sector. 

The growing importance of environmental, social and governance (ESG) efforts is at the front of many minds following another year of COVID-19, social inequality and climate change. It’s no different for banking and finance institutions which are facing increasing pressure from regulatory bodies and shareholder activists alike to ramp up their ESG initiatives.

Change is already being enacted across the sector. In fact, 80 per cent of banks have already made ESG commitments.[i] Several commercial banks, for example, have recently offered Britvic a sustainability-linked credit facility of up to £400 million dependent on whether the company can meet various ESG targets.[ii] These programmes, however, are complex, long-running initiatives. They require the regular processing of huge volumes of data, which can be both time consuming and expensive.

For example, if a bank wanted to track its energy consumption in the hope of reducing usage, it would need to collect and analyse data from hundreds of sub-entities and locations. Furthermore, in the case of green financing, banks will need to track the clients’ field operations, carbon emissions, supply chain activities, and a score of other variables. These are huge tasks that are extremely prone to error and it is here that automation can help.

What is automation?

In this case, automation refers to deploying software robots into a workforce to automate certain data-intensive and repetitive tasks. Once taught the process, these robots can operate a computer just as a human would, only virtually.

Using Robotic Process Automation (RPA) and complementary technologies such as Artificial Intelligence (AI), the bots can read, extract and process data that you’ve taught them to look for. Simply, if a process is rule-based and data-intensive, the chances are high that a software robot can help.

They are designed to follow the same steps every time and thus don’t fall victim to inevitable human errors. This allows them to execute rule-based and repetitive tasks more quickly and accurately than humans can. As a result, organisations around the world are using the technology to lighten administrative loads and give their employees more time in the day to focus on the value-added activities that require human ingenuity and skill.

How can automation help with ESG?

As ESG initiatives require such great volumes of data to be processed, increasingly the banking and finance sector is relying on software robots to lend a helping hand. Automation’s ability to collect and sort through huge volumes of data quickly and accurately makes it the perfect tool to assist in ESG initiatives and compliance.

Reporting is one area where software robots can be deployed as many ESG initiatives require data to be collected from multiple sources and reported back to employees. For a bank to offer lower rates of interest for green properties, otherwise known as green mortgages, additional documentation has to be processed to ensure the property meets the lender’s specifications. Software robots can comb through this information and report back to human colleagues as to whether the property meets the required green standards.

Furthermore, if an organisation wanted to shape their investment strategies in line with ESG policies, robots could scan through various sources of information such as prospectuses, annual reports and media reports, and consolidate the required information into the necessary format. This allows portfolio managers to have quick and easy access to the information needed to support their decisions.

Additionally, in order for ESG programmes to be successful, auditing is crucial. Once again automation can help. Auditing teams already have a lot on their plates even without ESG being thrown into the mix and so software robots can assist in much of the sampling, monitoring, and assessment activities that drive a successful ESG auditing program.

Automation is also being used to enact change in some financial institutions. For example, one business process management firm that provides solutions to the banking and finance sector has used software robots to digitalise loan documents and to manage customer processes. This has reduced its reliance on paper, thus cutting waste. Furthermore, a Turkish bank is using the technology in line with its social initiatives to process requests to postpone loan repayments for customers impacted by COVID-19.

While specific use cases will vary from business to business, the technology is proving itself to be an extremely useful tool when transforming ESG plans into realities. As corporate social responsibility grows in importance and the spotlight on ESG brightens over the coming years, those organisations that deploy automation now will be more ready for a world where ESG policies become a regulatory mandate, not a choice.

[i] https://www.consultancy.eu/news/5905/banks-globally-taking-sustainability-and-esg-more-seriously

[ii] https://home.kpmg/xx/en/home/insights/2020/05/embedding-esg-into-banks-strategies.html

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