Image credit: Global Finance Magazine
KUALA LUMPUR: Majority of banks agree that meeting environmental, social and governance (ESG) requirements will benefit their market reputation and credibility, but only half of them are ready for the challenge over the next six months.
They have cited data integration as the biggest stumbling block, according to a report compiled jointly by Avanade, a Microsoft solutions provider, and EFMA, a global non-profit organisation created by banks and insurers in 1971 to help them make the right decisions.
The research was conducted online from November 2021 to February 2022 and covered 51 respondents from 25 countries. Malaysia was represented by Malayan Banking Bhd (Maybank).
Among the other banks also covered in the research are ABN Amro, Banorte, BBVA, Caixabank, Desjardins, Deutsche Bank, ING, Novobanco and Standard Chartered Bank.
Entitled “Taking sustainability seriously: Are banks ready?”, the report highlights how banks and financial institutions are under increasing regulatory pressure to track and monitor their ESG progress.
Avanade and EFMA found that only 53% of banks surveyed will be ready for regulatory reporting in the next six months, whereas almost one in five (18%) are still unclear as to what the requirements are and almost one third (29%) will not be ready for at least another year.
“Over half of banks (57%) admit they will not hit net carbon zero operations until 2025. Only 15% stated they had already achieved this position while just over a quarter (26%) said they will be carbon neutral in the next 12 months to 24 months,” the report said.
Only one in four have a climate risk model ready now while a third (34%) plan to be in that position in six months.
The rest (42%) will not be able to test the impact of various climate scenarios for at least a year, with 12% having to wait two years.
The report said the majority of banks (70%) saw their ESG work as having the most benefit on their market reputation and credibility followed by balance sheet protection (50%). Other benefits were attracting younger groups of consumers, such as millennials and Gen Y/Z (44%) and better energy and waste management (34%).
Avanade and EFMA also found that increasing ESG investment options to attract younger customers is now the top priority for banks (42%), followed by greater transparency on the transition to a low carbon footprint (36%), fuller disclosure and reporting (34%) and a greener product portfolio (32%).
Varun Kumar, Avanade’s Southeast Asia financial services client group lead, said banks have a unique opportunity to lead in the world’s sustainability efforts and be a force for change but they need to move early to get benefits from the first-mover advantage.
John Berry, CEO of EFMA, said banks are now looking at how they can enact sustainable change and banking leaders do not view sustainability as a challenge, but a major opportunity – probably the biggest one over the next decade.
Source: https://www.freemalaysiatoday.com/category/business/2022/10/31/only-half-of-banks-worldwide-ready-for-esg/