How financial services firms are playing a pivotal role in driving progress on sustainability

The recent?IPCC report?was the latest ?urgent call for action on climate change, and global attention is firmly fixed on the upcoming COP26 meeting of world leaders in Scotland.

And while politicians and policy-makers will be central to determining how we respond, financial services institutions will play a pivotal supporting role. I’m excited by what our customers such as Rabobank and IberCaja are doing; they’re at the forefront of using finance, technology and data to advance sustainability.

Money makes the world go round, data turns it green

Financial firms’ unique position in the economy enables them to affect sustainable change at a tremendous scale. I’m encouraged by the many in the financial service industry that are ?rising to the challenge individually as well as collectively, through motions like the Net Zero Banking & Insurance Alliances.

These efforts aren’t just good for the planet. It’s good business for FSI firms too.

Today around 30% ($31 trillion) of global assets under management are invested based on ESG (Environmental, Social and Governance) criteria, a figure that has grown by 25% over last five years. And purpose-driven banking more broadly represents a $300B+ revenue opportunity, according to McKinsey, with strong demand from younger ?generations.

Sustainability activities of financial services companies typically span:

• Enhancing their own sustainability. For example, by moving their energy-intense datacenters to the cloud (which is up to 93% more energy efficient) or by creating smart buildings – such as Microsoft customer Intesa Sanpaolo, which reduced its buildings’ energy consumption by 15%.
• Enabling their customers’ sustainability, both for individuals as well as businesses. Banca Mediolanum built a new digital-only bank called “Flowe” that enables customers to measure their carbon footprint and offset it.
• Creating new sustainability focused products and services. For example, BNY Mellon created an AI-powered solution to enable investment managers to customize portfolios for preferred ESG factors. And Citibank built an intelligent “Green Assets as a Service” Platform for itself and its clients to help accelerate the launch of green investment assets.

Succeeding in these areas isn’t easy, and a major challenge - and opportunity - for Banks and Insurers is data. Insights connected to sustainability and ESG factors are often fragmented, widely disbursed and siloed. And the measures and standards in the ESG space are still nascent and constantly evolving, making it difficult to build any kind of ‘future proofed’ solution.

One way we help customers here is through our highly flexible cloud platform, which offers ‘plug and play’ sustainability solutions from our global partner ecosystem. And AI & Machine Learning tools can help analyse the vast amounts of data needed to generate real-time actionable ESG insights. So, despite the obstacles, major progress is nevertheless being made.

I’m proud of the partnership we have with our banking and insurance customers to support their sustainability efforts and the impact it drives. Let me give you a couple of examples.

Rabobank: a greener cup of coffee

Rabobank, a multinational banking and financial services company headquartered in Utrecht, The Netherlands, co-sponsors the “Coffee of the Future” program with Solidaridad, a global sustainability organisation. The program aims to transform more than 13,000 hectares of conventional coffee plantations to “climate-smart coffee”.

More than 6,000 coffee producers in South America are being funded to plant trees and increase biodiversity. The enhanced shade increases yields, whilst improving wastewater management and reducing reliance on inorganic fertilizer.

Income for farmers in the program has increased by as much as 20%. Farms also benefit from greater climate change resiliency and, critically, they capture more carbon dioxide than they emit.

The program uses a Microsoft Azure-based AI platform, developed by Rabobank, to connect coffee producers with companies looking to pay to offset the carbon dioxide they produce. Small farmers have often been unable to participate in carbon offset markets due to high transaction costs and the inability to verify the carbon they capture. The Rabobank platform solves this through providing farmers with a remote IoT device that measures CO2 measurement and uploads data via satellite, enabling the amount of CO2 a farm has produced and how much has been sequestered to be calculated. They can then sell the net capture as carbon offsets. Rabobank sees the potential to scale the platform globally with the aim to empower a million farmers around the world.

?“For us, the technology was very important because of the ingestion of satellite data and the AI models and the scalability of the infrastructure that we required. Applying technology to our most urgent sustainability issues is key.”??

Jelmer Van De Mortel, Innovation Lead Rabobank.

Ibercaja: using data to grow income and help farming become more sustainable

Spanish bank Ibercaja is helping farmers save water and energy, better manage their crops, and grow their businesses.

Working with partner EFOR Internet y Tecnología, Ibercaja developed a solution that combines IoT and AI technology. Farmers are provided with powerful, smart IoT devices that they place in their fields or vineyards. Multiple sensors take measurements, gathering data about temperature, light, moisture, wind, and humidity, for example. This data is uploaded every 15 minutes to Microsoft’s Azure cloud, where it’s combined with weather information. AI technology is then applied to predict the optimal timing for things like watering and fertilizing, or when to sow or harvest.

This helps farmers save money on water and electricity, and enables them to generate better crop yields, which means better prices—and more income at harvest time. A win for sustainability and for the financial wellbeing of Ibercaja’s customers.

“The most important thing is to give farmers the information to act: to save water or energy."

Victor Royo Escosa, Head of Digital Strategy and Innovation, Ibercaja

I see the digital transformation happening across the financial services sector continuing to accelerate. The worlds of high finance and sustainability might not always seem obvious bedfellows, but data-driven insight is key to both succeeding. I am inspired by the purpose-led solutions that customers like Rabobank and Ibercaja are driving. We’re all banking on the change they’re helping lead!