How can financial institutions take meaningful action on climate change?

The consequences of climate change have an impact on every sector, including the financial sector. The number of climate-related claims for insurers is increasing, banks are starting to ask some of their customers about climate risks and climate adaptation is part of the European Commission's Sustainable Finance Action Plan.

As the financial sector faces additional costs to comply with government actions on climate change, it also needs to ask itself some hard questions. Because are we acting responsibly for the future? Are we driving carbon neutrality in the businesses we finance? And are we acting as an enabler for investments to lower the cost and increase the deployment of low-carbon technologies? As sustainability is a key pillar in Worldline’s culture and to gain new insights, we attended the Sibos session ‘What’s at stake? How can financial institutions take meaningful action on climate change?’, where industry stakeholders discussed how to measure, mitigate, and address climate risk.

Stronger together

According to the panellists, there are many ways financial institutions can have an impact on reducing the effects of climate change. Growing concerns about climate change have led to a change in the perception of climate risk by companies and investors. While the analysis of climate-related issues has historically been limited to sectors directly related to fossil fuels and carbon dioxide emissions, it is now recognised that climate-related risks affect all sectors, including financial services. Banks are vulnerable to climate-related risks, as they are linked to all market sectors through lending.

Participating in national or international alliances, such as the Net-Zero Alliance, can be an option for banks and other institutions to undertake action. Abyd Karmali, Managing Director, Climate Finance at Bank of America, signals that those partnerships are becoming a gold standard within the industry. According to Karmali, it’s a way to show commitment to solving the climate crisis.

Creating insights and best practices

Interestingly, it’s also important to look at where the emissions are coming from. Something that might be easy to say, but harder to deliver on. In the end, however, these statistics can lead to better informed business decisions – not only for the financial industry, but for every stakeholder involved in the overall ecosystem. It is one of the ways to further secure the existence of a future for next generations.

One of the other challenges that came up during the session is that of applying scientifically based and governmental regulations to the actual day-to-day banking activities of the institutions themselves. It is up to the financial services industry to make those rules tangible for their business and customers. A strong point with which the full panel wholeheartedly agreed.

In some cases, financial institutions may finance companies based on – or working with – fossil fuels, perhaps from older investments or activities. It is then advisable to look for suitable and environmentally friendly answers for the future together with these parties. We are all in this together, after all. "Don't cut them off immediately but search for greener alternatives that create more sustainable growth. It also creates more meaningful alliances and partnerships," said Karmali.

Global warming, the changing of our climate and the effects of the way we do business affect every living creature on the globe. By collaborating closely together – within the industry, across borders and in alignment with governments and regulators – we can take meaningful thoughts about change into action. And the panel certainly showed a promising start.

As Worldline, we fully recognise this. Environmental responsibility is at the core of our culture and purpose. We design and operate leading digital payment and transaction solutions that enable sustainable economic growth and strengthen trust and security in our societies. CSR is fully embedded in our business strategy. Worldline takes its responsibility in this area and strives to put sustainability at the top of its agenda.