Banking on a Sustainable Future

By Tasha Chouhan, UK & IE Banking Lead at Tink

The United Nations Climate Conference (COP26) in November last year was seen as a turning point in speeding up the pace of climate action. It’s now largely accepted that today’s mitigation activities — such as lowering plastic use and reducing emission-heavy travel — are not enough to reach key climate and net-zero goals. Extreme climate events coupled with tightening regulations have added pressure on countries and companies across the globe to come up with new ways to reduce their carbon footprint.

Tasha Chouhan, UK & IE Banking Lead at Tink

Responsibility for being more sustainable used to lie firmly on the shoulders of industries like transportation and energy, that had the biggest direct impact on the environment. But today, more sectors have a critical role to play in helping us to reach our net-zero commitments and achieve a sustainable future – and the financial services sector is key.

Helping individuals drive sustainable lifestyle changes

As we move further into the UN’s Decade of Action, ‘climate-conscious’ is fast becoming a defining attribute of consumers. As the impact of climate change becomes more and more evident, people are no longer staying idle; instead, they’re eager to learn about how they can reduce their carbon footprint, and the financial services sector can help with this.

As an industry, the amount of real-time payment transaction data it controls on a daily basis is eye-watering. Through open banking, this data can be aggregated and analysed to provide a complete overview of a users’ behaviour, consumption patterns and preferences — from where they buy their morning coffee to the energy provider they use and the number of trips abroad they take.

The knowledge derived from this can then be turned into actionable advice, value-adding services and lifestyle insights — helping financial services providers to bring clarity to their customers on how they can change their behaviour for the better and lower their carbon footprints.

Transaction-based carbon accounting as a value-add for financial services

The good news is that an increasing number of banks and fintechs are opening their eyes to the opportunities that open banking has to offer in the journey towards sustainability. And we’re seeing an increasing number of partnerships forming between financial services providers and open banking platforms as a result. The outcome? The creation of an ecosystem of partnerships to help people reduce their carbon footprint — with Greenly, Youtility, Ecolytiq, Deedster, GoKind and epap just a few of the companies that are helping to guide us towards more sustainable habits, be that by tracking utility bills, and everyday spending against their climate impact or helping people to go paperless.

NatWest is an example of a bank taking huge strides in this area, launching a carbon tracker within its money management app in partnership with CoGo and Tink. Now available to over eight million NatWest retail banking customers, NatWest’s mobile banking app enables users to see their CO2 emissions associated with their daily spending and offers nudges to help them reduce their climate impact. Customers can also track the impact of their behavioural changes — such as eating less meat, switching energy suppliers or buying secondhand clothes — all from the app.

The value of solutions such as this is made clear by insights gathered from the pilot programme which indicated that, on average, Natwest app users lowered their emissions by approximately 11kg every month by making these small lifestyle changes.

These use cases firmly show one thing: Open banking is intrinsic to creating innovative solutions to help banks and fintechs tackle what is arguably the greatest challenge the planet currently faces. As the climate crisis continues, banks and fintechs are likely to double down on investments in new services that help businesses and individuals to become greener.

Global pressure for climate action is increasing

Aside from enabling companies and consumers to better understand the way their day-to-day habits impact the environment, open banking will also play a significant role in helping businesses meet regulatory requirements for sustainability.

For example, it provides banks with detailed data, enabling them to understand the carbon footprint of their individual and business customers. This, in turn, means they can identify the climate liability on their books — something which is integral to Scope 3 emissions reporting — and address areas of risk. The importance of this can’t be stressed enough; particularly given the UK has made the global climate risk disclosure standards, recommended by the TCFD, mandatory. This means that by 2025, all mid and large-sized UK companies will have to report on their operational carbon footprint, as well as that of their suppliers and customers.

With just 10 months to go until COP27 in Egypt, the pressure is on for governments, corporations and individuals to be held accountable for the impact of their actions on the planet. Fintechs and banks are now faced with a unique opportunity. While adapting to new sustainability requirements may be demanding, forward-thinking organisations can leverage open banking to turn sustainability into a competitive advantage; taking the lead in navigating their customers towards a greener future and driving meaningful change across the globe.