Retail Banks' Digital Transformation is Being Driven by Sustainability Initiatives – Report

Published on: 21 November 2022
by KnowESG
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A Boston Consulting Group (BCG) Banking Report found that retail banks have recognised the need to invest in environmental, social, and governance (ESG) efforts to embed sustainability into their digital transformation programmes and ESG initiatives.

The new report finds that ESG-related products in core business lines could bring in a lot of money for retail banks, since customers, investors, and policymakers now base their decisions on concerns about climate change.

Retail banks are reacting by including sustainability in their digital transformation initiatives. According to a recent Boston Consulting Group (BCG) survey, three-quarters of retail banks want to boost spending on environmental, social, and governance (ESG) activities.

According to the report, Global Retail Banking 2022: Sense and Sustainability, one-quarter of retail banks report that ESG is a primary emphasis area for their digital transformation, while another 38% say ESG is a critical consideration in selecting and prioritising digital transformation efforts.

Nearly half of retail banks prioritise environmental sustainability issues, such as reducing energy consumption in offices, while 60% prioritise governance issues, such as managing critical risk incidents, building cyber-resilience, and developing predictive risk analytics to ensure better preparedness and mitigation.

"Sustainability has moved up the list of priorities for all stakeholders," said Thorsten Bracket, a BCG partner, director, and co-author of the report. "This makes it the next frontier of competitive advantage for retail banks and a pillar for future growth."

“In addition to promoting sustainable behaviours by customers, ESG-related products could generate considerable returns for retail banks. A 20 per cent ESG-related share in new retail banking revenues in the next five years, for example, would result in about a 10 per cent share of total retail banking revenues—or about $300 billion—in 2025.”

"In Nigeria, banks are looking for ways to use sustainability to solve both immediate and long-term problems. For example, at their working branches, many banks are replacing diesel-powered generators with solar panels, which reduces the amount of carbon dioxide they put into the air. Banks in Nigeria also use sustainable finance as a way to grow, and the benefits are geared toward giving customers what they want.

“Access Bank’s recently issued green bond demonstrates the high demand and potential for green capital in Nigeria and on the continent. Going forward, a more structured approach will be critical to anchor “Sustainability as an Advantage” and deliver long-term value for banks,” according to Phillipa Osakwe-Okoye, principal, BCG Nigeria.

For more sustainable finance news

Source: Business Day

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