could, if they chose, use these to effect change. And some are. Fifty-seven per cent of lenders plan to launch green mortgages after the pandemic, according to the Intermediary Mortgage Lenders Association, which should reduce carbon emissions. Among them, UK bank Tandem is launching a raft of environmentallyfocussed products, positioning itself as ‘the good green bank’. It definitely sees itself as part of the solution and has presumably identified a revenue-generating opportunity in sustainable investments. Alain Cracau, from Dutch cooperative Rabobank, is sympathetic to that view. In the Netherlands, a tie up between banks and government encourages it. The Dutch Green Funds Scheme (GFS) is a tax incentive that encourages environmentally-friendly initiatives. Individual investors lend their money to banks at lower interest rates, but are compensated with an environmental tax credit. These ‘green banks’ can then offer cheaper loans to environmental projects. “One dollar of public money (tax) leverages $30 of financing,” says Cracau. He does see banks fulfilling a strategic role. “What we, as banks, have is the data, the experience, the knowledge of what’s really happening, and what would be a realistic next step to improve the economy and society. Putting that knowledge together with government is important. While we will never say to clients ‘you should do this’, we have our own responsibility [towards sustainability]. It’s about leadership, it’s about a mindset,” he says.
Sustainability creates a new economy and, wherever there is an economy, you come back to the bank Alain Cracau, Rabobank
The cooperative bank’s members are already well aware of the influential relationships banks have with people and with government, and looks to them to be first movers when it comes to building a new, more-sustainable economy. www.fintechf.com
“We talk to our members in dialogue sessions that we hold in the regions – about the economy, jobs, and how we want to live as a society,” says Cracau. “And people always come back to us and say ‘you are the organisation that talks to us, that talks to the government, that talks to companies. Could you be the lynchpin?’. So, that’s one role for banks: creating a dialogue about how society works together [on sustainability]. “The public-private coalition, I think, is important here. As a country, the Dutch are also signed up to the Paris Climate Agreement and, over the next 10 years The Netherlands need to invest €40billion. Therefore, it’s important that we talk to both the government and businesses about how we are going to spend that.” Rabobank is also active in encouraging ‘the sort of disruptive innovation for the transitions we need’, according to Cracau. “That inspires a lot of our own people, whatever their role in the bank, to contribute to how we make this happen. “Sustainability creates a new economy and, wherever there is an economy, you come back to the bank”, he adds.
HOW ARE BANKS ENCOURAGING GREEN INVESTMENTS? Institutional, and many retail, investors finally appear to have ‘got’ the sustainable investment message: that ‘doing good’ doesn’t equate to investments performing badly. And there is plenty of evidence now to support that. In early 2020, Larry Fink, the boss of BlackRock, the largest asset management company in the world, in his annual letter to CEOs, famously stated that it would henceforth ‘put sustainability at the centre of its investment strategy’. The decision was no doubt partly – if not primarily – motivated by a desire to protect its investments from the risk (both regulatory and reputational) that companies who did no more than pay lip service to environment, social and governance (ESG) principles, posed to its investments. MSCI’s 2021 Global Institutional Investor Survey of 200 institutions that owned assets totalling approximately US$18trillion, found that more than three-quarters (77 per cent)
had increased ESG investments ‘significantly’ or ‘moderately’ last year. Among those, one third of the largest institutions (over US$200billion of assets) said climate risk will be the biggest determinant of how they make investment decisions in the future. Cracau says the bank’s private clients, too, are looking for more impact investments. “Everybody is looking for a return, but, on top of that, they want a
There is a growing trend of environmentallyconscious consumption, and in the number of customers who really want to understand their environmental footprint Bragi Fjalldal, Meniga
return for society,” he says. “And we see that sustainable companies are a better risk – for personal investors, a business investor or even venture capital. “Climate change creates big risks. And banks are all about risk management. So it becomes part of how money is managed in a financial institution, how you demonstrate where you get the money from, and what you put it into,” says Cracau. The individual or retail investor might be more powerful than they think in this battle. But do they understand how to access the sustainable investment market? Bragi Fjalldal from Meniga believes banks have a duty to show them. Meniga’s digital banking platform helps banks use their data to build customer engagement through finance management and more solutions for customers. It recently launched a white-label Carbon Insights tool (see left) that reveals a customer’s carbon footprint, nudges them towards more sustainable consumption and offers them impact investment options. The fintech is based in Iceland, a country witnessing, firsthand, the dramatic impact of climate change. “This is about giving customers information to make the right choices,” Fjalldal says. Issue 19 | TheFintechMagazine
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