Sustainability in Digital Banking: Trends and the Crucial Roles of Banks and Consumers

Ondřej Slivka
taghow to
time-icon5 minute read

Sustainability is becoming an increasingly key issue in digital banking, both from the perspective of consumers and from the standpoint of banks reflecting their interests as well as their ESG strategy. The interest also reflects a growing awareness of the climate change we are facing. In this article, we take a detailed look at why green direction and green thinking in banks and their banking applications are coming to the foreground now. We will reflect on the main differences between truly sustainable banking and greenwashing. We will also look at current initiatives that are working in the market to promote sustainability in banking.

In addition, we will look at the approach that traditional banks and new neobanks are taking towards sustainability. Approaches may differ, but we are mainly interested in the importance of sustainability for the banks themselves versus offering sustainable features to consumers. Sustainability in banking (not just digital) is, and should be, a collaborative effort across society, driven by banks and consumers. A collaborative approach is key to change and protect our environment.

Eco banking wave

Why is this initiative gaining traction nowadays? The eco wave in digital banking has become a trend due to the growing awareness of climate change. This is increasing the focus on environmental protection, including from the media, which in turn motivates further improvements to the situation. As a result, companies and individuals are more apt to concentrate efforts on sustainability and seeking financial institutions that support green or greener projects rather than existing ones. 

This is a concerted effort to reduce the carbon footprint, which can be illustrated to some extent by ESG reporting, which affects the financing of some projects and also the banks themselves. An example of this is the growing number of sustainability-focused banks, such as Triodos Bank, which has become an expert in financing renewable energy projects.

Green banking vs. Greenwashing

Green banking is a label for banks that are genuinely and measurably moving toward sustainability. On the other hand, there is greenwashing, which is the practice of companies (not just banks) presenting themselves as sustainable without taking real action. ESG ratings help us to check these values.

As an example of greenwashing, let’s take an unnamed bank that highlights its ‘green values’ in its TV advertising. In reality, however, most of its portfolio consists of financing coal-fired power plants and mining. The bank has no measures for sustainability and reducing its carbon footprint, yet it presents itself as ‘green’ in its public facing promos. Customers and investors should therefore be careful when choosing a bank to ensure that the statements and vision of the bank they choose are true and documentable.

Looking at the latest ESG and Sustainable World Bank rankings, the top spots are occupied by BNP, Standard Chartered, Citi, and others.

Best perceived ESG/sustainable finance provider

The research involved direct interviews with the 100 highest-revenue companies in the world’s largest markets.

Rank% of Total
BNP Paribas11.4
Standard Chartered9.3
Source: Net Zero Investor

Available initiatives

There are a number of initiatives and global programs that promote sustainability. If we focus on banking, there is an initiative: the Global Alliance for Banking on Values (GABV), which brings together banks worldwide. These banks are committed to financing sustainable and social projects.

Another example has been created directly under the auspices of the United Nations (UN) and is called Principles for Responsible Banking.  The initiative serves as a framework for banks to implement sustainable strategies into their internal processes.

The rise of ESG sustainable investing

According to Bloomberg Intelligence research, total assets invested in ESG assets will exceed $50 trillion by 2025. Between 2022 and 2025 alone, investors will allocate $9 trillion to these assets. It now depends on which bank, neobank, fintech, or investment fund gets these assets under its management.

How do banks’ and neobanks’ approach sustainability

Banks that have been with us for decades are now trying to focus more on sustainability and approaching it from different angles. This has led some players to focus on investing in sustainable projects, while others are looking at reducing their carbon footprint (e.g., sorting waste, using less energy, replacing their corporate fleet, etc.). 

On the other hand, we have neobanks, which are digital innovators and visionary banks. Non-banks often build on sustainability as their key pillar. They don’t have a large and demanding branch network and they use digital channels of communication instead of paper ones. One example is the neobank Tomorrow, which offers its customers the option of eco-friendly cards made of wood. In addition, the user can reduce their carbon footprint or invest in ESG assets.

Another example is the neobank bunq. Together with Eden Reforestation Projects, the latter will plant one tree for every €100 spent by users on a reforestation project in Kenya and Madagascar. More information can be found here.

Sustainability of the company vs. for consumers

Which is more important? In an ideal world, the key is to strike a balance between the sustainability of the digital bank itself and offering sustainable services to consumers. How can this be achieved? The important thing is to embed these values directly into the DNA of the company and then translate these values into your strategy.

Such a values-based strategy can work in the long term while providing tools and options that empower consumers to make sustainable financial decisions. Both sides of this ‘coin’ are important and complementary. The long-term sustainability of digital banking depends on the commitment of both companies and consumers.

How do digital banks approach this?

We asked the experts. In the panel discussion, we cracked down on the best practices in releasing environmentally friendly features with all consumers at top of mind.

In this article, we have explored the main points aimed at achieving sustainability in banking, not just digital banking. It is clear that each bank has its own approaches and initiatives toward sustainability. As long as banks are transparent and proactive in informing their customers about their sustainable measures and offerings, we don’t have to worry about greenwashing. By working together, we can create a financial ecosystem that helps and protects our environment.