PIMFA
Cutting Carbon: The Power of Collective Change
In our everyday lives, it can be easy to forget the impact our actions have on the environment, especially in terms of carbon output. As the world focuses more on sustainability, standardised processes within each industry are starting to be analysed for their influence on carbon emissions and the resulting environmental change. It’s clear that change is coming for each sector, and as one of the largest industries in the world, financial services will have a large role to play.
Thinking about the current carbon output of the financial sector, there are several key contributors, with one being investments and lending decisions. Many financial institutions continue to provide funding for fossil fuel projects, such as coal mines and oil and gas drilling, which adds significantly to carbon emissions. Customer products and services are also a consideration, including high-carbon mutual funds or real estate investment trusts (REITs) that invest in carbon-intensive properties.
Reports show that in 2019, the UK Finance sector was responsible for financing 805 million tonnes of CO2 through their lending and investment activities. However, with a lack of organisational transparency and comparable data, the true number is thought to be much higher.
Even with this estimated number, 805 million tonnes of CO2 is almost double the annual net emissions of the UK as a whole. Putting this into greater context, this would be the same amount of CO2 generated by 57 billion flights from Amsterdam to Paris, or equivalently, fully charging 97 trillion smartphones.
The financial services industry also creates a large carbon footprint from its direct emissions. This can be attributed to a substantial number of offices and data centres that consume high amounts of energy, as well as regularly conducting carbon-intensive processes such as print, pack and post.
This large amount of carbon has a profoundly negative impact on our environment and public health. As global temperatures rise, the effects are becoming clearer and more devastating, with increased sea levels and altered weather causing coastal and structural damage, heat waves destroying coral reefs and other habitats, reduced crop yields and increased threats to human life through air pollution and infectious diseases.
The industry as a whole is in need of a collective shift, especially with consumer demand for environmentally-friendly products on the rise. Customers are becoming increasingly aware of the threats to our environment and are more likely to do business with organisations that prioritise sustainability, so those falling behind the curve may be in danger of failing to retain or attract new clients.
When it comes to lending and funding, banks and other large financial organisations will be vital for encouraging change, shifting their support from high-emitting processes and behaviour and pushing for sustainable low-carbon alternatives. This will include creating incentives that encourage ESG compliance, along with decarbonising their portfolios by supporting the development of new, sustainable tech and cutting finance to companies that remain carbon intensive.
Organisations must also take the steps to reduce their direct emissions and become carbon neutral, sourcing renewable energy for buildings and offsetting emissions through green initiatives. The development of offices and other commercial buildings will be important, with possible larger-scale improvements involving the use of recycled rainwater and solar panels.
Additionally, digital capabilities will play a large part in this change. With the pandemic helping to push more services online, financial organisations should continue this trajectory, starting by increasing their online banking capabilities and lessening the need for physical branches. Switching paper comms to digital will also be an easy win for FS, as using a secure email or other chat solution minimises reliance on carbon-intensive postal services and offers greater efficiency, speed and data security. Top of Form
Finally, moving IT workloads from on-premise data centres to the cloud is a step businesses are more readily starting to take, with studies suggesting that the reduced energy consumption could offer potential annual savings of £1.2bn and carbon reductions equivalent to the annual emissions of over 4 million passenger vehicles.
As financial services professionals, we have the power to make a positive impact through the decisions we make in our personal and professional lives. The stepping stones for industry change are starting to be laid out – it is now up to us to follow them, so that we can contribute to a more sustainable future for all.
Paul Holland, CEO and Founder of Beyond Encryption
