How automation can drive ESG in banking and financial services

By Gavin Mee, Managing Director Northern Europe at UiPath

explains how software robots can support environmental, social and governance (ESG) initiatives in the banking and finance sector. 

Regulatory bodies and shareholders alike are ramping up the pressure on financial institutions to prioritise environmental, social and governance (ESG) initiatives. With the growing importance of corporate social responsibility, ESG programmes can’t purely be a public relations exercise—true commitment and compliance is now crucial to success.

The adoption of such initiatives is growing, with 80 per cent of banks having already made 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] However, these programmes aren’t often simple. To ensure ESG initiatives are successful, a huge amount of data has to be collected, processed, and reported on.

Take banks committed to green financing, for example. They likely will need to track the clients’ field operations, carbon emissions, supply chain activities, and a score of other variables. Likewise, a bank that wanted to track its energy consumption would require intensive data collection and analysis across hundreds of sub-entities and locations. This is an enormous, error-prone undertaking and it is here that software robots can help.

What is a software robot?

Think of a software robot as a digital assistant — an extra pair of hands to help out with repetitive and data-intensive tasks. Using Robotic Process Automation (RPA) and complementary technologies such as Artificial Intelligence (AI), these robots can operate a computer just as a human would, only virtually.

Once taught the process, these robots can read, extract and process data as necessary, more quickly and accurately than a human could. Organisations around the world are already using this automation technology to lighten administrative work loads and as a result are giving their employees more time in the day to focus on the value-added activities that require human ingenuity and skill.

How can software robots help with ESG?

Increasingly, the banking and finance sector is finding software robots are becoming an integral part of ESG success. The technology’s ability to comb through huge volumes of data, quickly and accurately, makes it the perfect tool to support ESG initiatives and compliance in a number of ways.

For example, software robots are often deployed into reporting processes. Let’s take the growing interest in green mortgages as an example. Increasingly, financial institutions are offering lower rates of interest or additional principle for loans on green properties. This requires additional checks and documentation to be processed to ensure the property meets the lender’s specifications. Software robots can sort through this information and report back to human colleagues as to whether the property meets the required green standards.

In other institutions, software robots are pulling together reports to help shape investment strategies in line with ESG policies. Robots can pull information from prospectuses, quarterly and annual reports, third party analysis and media reports, and consolidate the required information into the necessary format. This makes it easier for portfolio managers to make responsible, purpose-driven investment decision that support their ESG initiatives.

However, its application also stretches beyond reporting, the technology can also be used to enact change. 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 bolstered its ESG initiatives by reducing the reliance on paper, thus limiting physical waste. Furthermore, a Turkish bank is using the technology to process requests to postpone loan repayments for customers impacted by COVID-19 in line with its social responsibility initiatives.

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 without ESG being thrown into the mix too and so software robots can assist in much of the sampling, monitoring, and assessment activities that drive a successful ESG auditing program.

The application of automation in ESG initiatives is vast and often varies from business to business depending on their specific goals. No-matter the ins and outs, it’s clear that corporate social responsibility is viewed by the banking industry and its customers with increased importance,  and with that firms will only be expected to focus more effort on ESG programmes as time goes on.

Human colleagues can’t pick up all this work alone and ideally should remain focused on those tasks that require decision making and strategy. Software robots, however, are the perfect candidates to assist with the data-heavy processes that come with ESG initiatives. Those organisations that deploy automation now to address their ESG needs will be ready to respond to new regulations and standards as they emerge.