People are aware of the importance of Climate Change. As such, the ultimate goal is to achieve a zero-carbon emission world. Unfortunately, we can't accomplish this overnight. Above all, we have to teach everyone about it. Then, we have to convince people that it is the right thing to do. Everyone should feel a need to reduce their carbon footprint.
We, as individuals, can do our bit by taking real climate change actions. One example of this is refusing to buy plastic. Thus, that would make the big companies rethink. Ideally, they should offer more eco-friendly, green products. The producer will respond to consumer demand. It is the consumers' responsibility to dictate the rules to the producer.
The Paris Agreement
The Paris Agreement came into force on 4 November 2016. Primarily, its goal is to limit global warming. The goal is to reach a level below 2, preferably 1.5 degrees Celsius. Furthermore, the agreement relies on the cooperation of the world's big businesses for it to succeed. Thus, all involved must take it seriously.
We need to get big business on board. Their primary obligation is to their shareholders. Banks will put their profit ahead of everything else. They need interesting incentives. Making progress to reduce climate change isn't easy. Besides, the global finance industry needs technology to measure climate risk and attract investments. This can be done in the form of sustainable finance.
The role of sustainable finance
The term Fintech (Financial Technology) describes the delivery and use of new financial services. As such, it provides automated and improved financial services in real time. In comparison to traditional banks, FinTech startups are extremely flexible and fast. It can quickly implement new, exciting services based on changing demands. This form of sustainable finance is the key to attracting big business.
Why is financial technology important? The goal of FinTech is to make financial services less expensive and more flexible per transaction. It makes doing business easier. Together, the finance industry accelerates climate resilience. On top of that, infrastructures can be sustained through tech-enabled platforms. It is the bank's job to get big business on board as quickly as possible.
How to reduce emissions
One way the banks can attempt to reduce carbon emissions is through client cooperation. The banks can collect the companies' emissions data. Furnished with this data they can formulate a strategy. In agreement with the client, the bank can set emissions reduction targets. The bank and the company can liaise, regularly, to discuss their progress and solve any potential emerging problems.
Banks should use data and conversations with clients to benchmark their performance. Each bank should implement clear client-engagement policies to ensure clients transition to low-carbon activities. This should include a defined timeframe for the transition. Staff needs to be trained on requirements and opportunities. In addition, banks’ human resources policies should design the right incentives for training and rewards for non-financial performance.
Reducing carbon emissions with attractive financial products
What do the banks do with non-conforming clients? Refusing to have them as a client is an extreme action Working together is the answer. Help them transform into low-carbon activities. This is the goal. Green Bonds may be the answer. Offering sustainability-linked loans. Additionally, banks can offer attractive loans to companies. This will help them towards starting low-carbon activities.
Move to the cloud
Moving to the cloud means going green. Savings can be up to a billion dollars. Besides, it will significantly reduce carbon emissions. They reduce carbon emissions because data centers can offer environmental economies of scale. When a company stores the information somewhere else, it saves on energy. The energy used by the cloud cannot compare to the energy used by a company.
Without a doubt, going digital would help Financial Institutions to escalate sustainability goals. Banks can capitalize on various other FinTech services by boosting Artificial Intelligence-based methods. For instance, as the world is slowly moving towards a cashless society, banks can cut plastic and paper consumption by graduating from physical to digital credit and debit cards. This is something that will happen.
In the UK, there are 97 million debit cards currently in circulation, and an estimated 1.1 billion in the US. Between these two countries, that is 6,000 tonnes of plastic. And that’s before we count the plastic banknotes. The banks will be driven by the market. Importantly, it is up to the Consumer to demand digital banking. The banks will provide it.
Cooperation. Understanding carbon emission
Banks and big businesses should get together. The banks will have to sell their green products to them. Furthermore, they should work together to achieve zero emissions for everyone's good. In addition, future generations will thank us for taking the first steps. Steps that should have been taken years ago. If anything is worth doing, it has to be saving the planet.