Banks sustainability challenges

The top environmental, social and governance (ESG) concerns of Australian bank boards are the cultural shift in banking behaviours, burdensome regulatory compliances and sustainable banking, according to a new report.

The report, A Global Benchmark for Sustainable Banking 2022, was commissioned by digital consultancy Mobiquity and conducted by Censuswide. It surveyed the views of 602 C-suite banking executives across the United States, the United Kingdom, the Netherlands, and Australia.

Honing in on Australia, it found the key barriers to adopting sustainable behaviours are the lack of universally recognised regulation and enforcement (31 per cent), stakeholders (27 per cent) and lack of customer demand (27 per cent).

The top strategic sustainability imperatives of Australian banks are mitigating climate risks by assessing portfolios (31 per cent), followed by embracing emerging technologies to make digital services available remotely (30 per cent) and driving sustainability as part of an ESG strategy (29 per cent).

“Living in a vast geographical landscape such as Australia, the need for remote digital services to enable financial inclusion is just the bare minimum expected by today’s customers,” says Gustavo Quiroga, general manager for Mobiquity in APAC.

“Banks now need to look beyond these basic criteria and address looming social challenges that evolve from inclusion, such as the need to support financial health.”

According to the report, just over half of Australian banks are measuring sustainability as part of ESG targets, falling short of US counterparts where two-thirds admit to measuring sustainability as part of ESG targets.

Cost savings (27 per cent), attraction of long-term investors (26 per cent) and a positive contribution to society (25 per cent) were listed as the key benefits of adopting sustainable banking in Australia.

Looking more broadly, Peter-Jan van de Venn, strategy director, financial services at Mobiquity, says this year’s report shows a continued growing awareness of sustainable banking with more institutions in the four countries surveyed increasing their reporting at the board level as well as integrating it into their business strategy.

“Banks are also citing that sustainable banking increases profitability, operational efficiencies and customer loyalty,” he says.

“Meanwhile, they are holding their supply chain accountable with a large proportion of banks ensuring their customers and suppliers adopt sustainable practices.”

While there has been some good progress on placing sustainable banking at the top of the boardroom agenda, van de Venn says the report shows that there is still an issue with banks saying and not doing.

“Greenwashing is an ongoing challenge for banks and they will only be able to protect their reputation if they fully optimise the execution of their sustainable initiatives,” he says.

So, why are banks failing to execute their sustainable strategies?

Mobiquity’s research shows that the greatest barrier to being sustainable for the UK, Australia and the US is the lack of universally recognised regulation and enforcement. For the Netherlands, long-term commitment to execution is the main hurdle. Another key hurdle still prevalent in the US one year on from Mobiquity’s 2021 report is talent management.

“Clearly, banks want to do something about being sustainable, with many citing sustainable initiatives,” says van de Venn. However, their focus has been misplaced in offsetting non-sustainable behaviours with short-term solutions, such as investing in carbon credits.

“To truly establish long-term sustainable outcomes, banks need to go beyond buying their way out and must look inwards to improving their processes. This begins with investing in the right people to implement a robust form of measurement and track sustainability across the organisation.”