Finding New Opportunity in Green Banking
As green initiatives sweep across the globe, more and more financial institutions are taking note and taking action. The approach to green banking or sustainable banking as it is also known varies from organisation to organisation. However, one definition is that is sustainable banking means using all of the banks resources with responsibility and care, avoiding waste and giving priority to choices that take sustainability into account.
The trend towards green banking is still largely driven by and directed toward consumer behavior. An increase in online bill-pay and the use of paperless statements translates not only into less paper to be processed, handled and discarded but it also can lead to reduced staffing needs which can mean significant savings for the bank. In the past few months, several major banks have introduced incentives to encourage their customers to reduce paper by moving to online banking. These incentives vary from rewards cards to contests to cash rebates and may help to speed up the online banking adoption rate.
A 2008 survey from Javelin Strategy & Research found that 57 percent of consumers expressed interest in green banking initiatives, and that number appears to be growing. About one third of consumers who turned off their paper statements said they did so in order to reduce their impact on the environment; three years ago, only 21 percent of those surveyed gave that reason. In addition to the environmental benefits of going paperless, it reduces consumer's risk for fraud and identity theft, says Jim Van Dyke, president of Javelin.
The value proposition for corporations to go green includes many of the same issues as that for individual consumers but on a much larger scope and with additional concerns. Corporations may share a desire to reduce carbon footprint and enhance security by eliminating paper waste, but they are also extremely concerned with eliminating or decreasing errors due to manual processing and with creating a profitable bottom line. For these reasons and more, corporations are actively pursuing green programs, many companies are taking active steps to reduce waste, implement sustainability measures and increase profitability by going green. Among companies taking action in 2007:
To facilitate green initiatives, GXS and Verizon Business formed an alliance targeting transactions among vendors, partners and customers. The companies said that by automating annual business-to-business transactions worldwide, estimated at about 40 billion transactions, companies would cut 2.3 billion pounds of CO2, or the equivalent of removing about 200,000 cars of the road for a year.
According to the Aberdeen Group, a company that processes 500,000 invoices per year can cut manual process costs by 60 percent or more if automation is implemented. For financial institutions that support wholesale clients, this green trend toward cost savings and streamlined operations would translate into additional capital to fund new growth.
Even as the market slows in the face of economic upheaval, many financial institutions and corporate are keeping a focus on green. For banks their activities are manifesting with policies that focus on green lending trends and investment strategies. Financial institutions are also pledging their commitment to sustainability further by signing on to initiatives like the Equator Principles and the United Nations Environment Programme Finance Initiative (UNEP-FI).
The Equator Principles contain benchmarks of social and environmental management best practices to be followed in project financing. To date, 61 of the largest financial institutions in the world have adopted them and include such well known names as Bank of America, Citigroup, JPMorgan Chase and Wells Fargo.
UNEP FI is a global partnership between the United Nations Environment Program and the financial sector including over 160 institutions, such as banks, insurers and fund managers. These institutions have signed the UNEP FI Statements, which call for a commitment to develop and promote linkages between the environment, sustainability and financial performance.
Banks, like their corporate clients, have realised that sustainability and profitability go hand in hand as organisations looks to cut costs, streamline operations and create long-term processes.