Leading a different kind of charge: Financial Institutions as climate change activists

Steve Croke scaled - Global Banking | FinanceSteve Croke scaled - Global Banking | FinanceSteve Croke, Chief Technology Officer for Financial Services at GlobalLogic, explains how the financial sector has the potential to be an essential vehicle for the net zero journey

Climate change affects the physical environment, threatening all aspects of natural and human systems, and directly contributes to humanitarian emergencies. With 3.6 billion people already living in highly susceptible areas, between 2030 and 2050, it is expected to cause around a quarter of a million additional deaths per year.

According to the UN, we are at a critical moment for humanity; the window to limit dangerous global warming and ensure a sustainable future is quickly closing.

Yet, despite overwhelming scientific evidence and decades of campaigning against fossil fuels, the world’s biggest 60 banks have financed expansion operations in the industry by a staggering $3.8 trillion since 2015. It’s time for the financial sector to change and lead a different kind of charge– climate activism.

The delicate balancing act

The global financial sector’s commitment to net zero is beyond question. At COP 26, over 450 financial institutions in 45 countries pledged to contribute to the goal of limiting greenhouse gas emissions. In its 2023 Progress Report, this coalition – known as the Glasgow Financial Alliance for Net Zero (GFANZ) – showed growing participation and tangible momentum across key metrics.

However, banks need additional funding and facilitation to transition to low-carbon options. This takes investment into new technology and altered business practices, which raise risk-related red flags and complications around third-party management and data limitations.

Investors, stakeholders and customers compound pressure by demanding accountability over fair, transparent and secure conditions that prioritise their interests. All of this hinders banks from taking action.

Supporting tailwinds

Rather than battling headwinds, banks must align on global climate initiatives and create supporting tailwinds with new policy. That was the rallying cry of ESG expert Abyd Karmali, Bank of America’s managing director of ESG and sustainable finance at Sibos 2021– a sentiment I share.

We’re starting to see real progress with initiatives like Sibos that enable ongoing conversations between regulators and industry and drive best practices. Still, change only happens when people want it to.

NatWest, under its previous climate advocate Chief Executive, Alison Rose, put words into action. Not only did it sponsor COP26, but the bank is making strategic moves. In an effort to cut back on fossil fuel exposure, it pledged £100 billion for sustainable energy projects by 2025 and phasing out all global coal-sector lending by 2030. We’ve seen similar pledges from other banks, such as Lloyds and HSBC.

We’ve also witnessed a wave of green-inspired technologies—for example, the app calculator Sugi tracks and compares individual investments’ annual carbon impact. The cloud-based software service Doconomy Åland Index API enables the tracking of CO2 emissions across every consumer transaction.

The latest ESG regulations emphasise measurability and accountability, which removes ambiguity around sustainability goals. It’s also a nod to the vast amounts of data financial institutions hold. This data provides a wealth of information about consumption patterns and preferences and is vital to furthering the green agenda. However, banks can only drive transformational change if data is unified and used correctly– this is where enterprise tech solutions come into play.

Furthering the climate agenda 

Recognising the need to organise and unify hundreds of data sources, ranging from legacy, host and technical debt, GlobalLogic has, for instance, helped develop the architecture to support an in-house data model capable of sourcing, storing and evaluating all data. This repeatable and scalable model produces real-time reporting for regulatory obligations and banking customers and is successfully in use at a top five UK bank serving 19 million customers annually.

The risk to an investment portfolio is dependent on economic and environmental changes. In a recent use case, GlobalLogic established a framework, building out processes and controls to evolve our client’s choice of data model into a sophisticated analytics tool. Assessment of environmental factors before lending, investing or insuring decisions was consequently made possible.

These and other innovative solutions help to further the net zero agenda in the industry, but enterprise tech solutions are only part of the picture. It is through the alignment of advocacy, policy, and engagement efforts that financial institutions will ultimately power the green transition and lead a different kind of charge– transformational climate change.

 

About Steve Croke

Steve Croke is the CTO Financial Services at Globallogic, a Hitachi company. In this role, he drives the technological vision and strategy of the Financial Services Business Unit, designing innovative, relevant solutions and providing technology direction to key clients. He has over 30 years experience in Financial Services Technology and has worked extensively throughout North America, South America, Europe, and Asia.

Prior to joining Globallogic, Steve held senior technology roles at HSBC, NatWest, and Discover Financial Services. These included overseeing the delivery of a new Core Banking system for HSBC and heading up the Core Banking and Payments Technology divisions for NatWest, one of the UK’s largest banks. He is passionate about developing high-performing teams and embracing innovation.

 

About GlobalLogic

GlobalLogic is a leader in digital engineering. We help brands across the globe design and build innovative products, platforms, and digital experiences for the modern world. By integrating experience design, complex engineering, and data expertise—we help our clients imagine what’s possible and accelerate their transition into tomorrow’s digital businesses.

Headquartered in Silicon Valley, GlobalLogic operates design studios and engineering centers around the world, extending our deep expertise to customers in the automotive, communications, financial services, healthcare and life sciences, manufacturing, media and entertainment, semiconductor, and technology industries. GlobalLogic is a Hitachi Group Company operating under Hitachi, Ltd. (TSE: 6501), which contributes to a sustainable society with a higher quality of life by driving innovation through data and technology as the Social Innovation Business.