Report finds sustainability deprioritized as banks respond to the economic crisis

Hexaware Mobiquity, a digital transformation enabler, has published the findings of its Benchmark for Sustainable Banking Report 2023. The research, based on a survey of 150 UK banking executives conducted by Censuswide, shows that sustainability has fallen down the agenda in the past 12 months. Only 60% of UK banking leaders say sustainability is an important part of their business strategy, compared to 100% just 12 months ago. Their attention has been diverted to more immediate problems such as rising interest rates, falling consumer confidence and the need to drive profitability. In fact, more than a third (34%) of banking leaders say prioritising ESG (Environmental Social Governance) could impact profitability and would not immediately show financial returns.

In line with these fears, many UK banks have pressed the pause button on sustainability-related activity. The majority (60%) of them are not actively taking steps to foster sustainable behaviours and outcomes. Banks are also less concerned about offsetting their unsustainable practices by investing in carbon credit schemes – less than a third (29%) are currently doing so, down from 50% in 2022. Meanwhile the number of banks with an executive at board level overseeing sustainability strategy has decreased from 83% last year to 54%. The lack of a cohesive ESG strategy was identified as the most common barrier preventing UK banks from adopting sustainable behaviours, indicating the need for clearer direction and leadership.

“Last year’s report showed that banks had made significant progress in elevating their sustainability strategies, but much of that work is now being undone,” said Peter-Jan Van De Venn, VP Global Digital Banking, Hexaware Mobiquity. “The macroeconomic headwinds have forced banks to batten down the hatches and focus on activity that will deliver clear, immediate returns. From board level to front-line teams, banks have been concentrating on keeping their bottom lines healthy, forcing sustainability to take a back seat. Whilst it’s understandable that banks are feeling under pressure, there’s a risk being laser-focussed on the immediate crisis will lead to them missing out on the long-term benefits that sustainability brings.”

Technology holds the key to sustainable growth

All respondents said their bank is pursuing a sustainability strategy, with more than three quarters (76%) using digital transformation initiatives to drive sustainable outcomes. However, almost half (45%) don’t check the sustainability credentials of suppliers as part of the procurement process – meaning their strategy will only have an isolated impact in practice. Customer sustainability is more of a focus, however, as UK banks called out mitigating climate change risks through assessing their client portfolio as the top strategic imperative in their sustainability agenda (37%).

Banks have a growing awareness of the benefits emerging technologies can play in the sustainability drive, with more than a third (35%) using the power of machine learning, artificial intelligence, cloud and analytics to make digital services accessible to customers remotely. Looking even further ahead, more than nine in ten of them have either invested in the metaverse (38%) or are planning to do so (55%), as they explore the potential to harness virtual and augmented reality in banking.

“Amid difficult trading conditions, UK banks need to keep pushing forward with their sustainability  strategy,” Van De Venn added. “Hexaware Mobiquity sees emerging technology playing an important role in driving both more sustainable behaviour and growth, enabling banks to compete through strong digital products. For example, the metaverse brings the potential to bridge the gap between physical and digital banking, reducing emissions from unnecessary journeys and cutting both costs and energy consumption of running high street branches. Technology can also bring tangible benefits in the short-term, helping deliver the convenient digital banking experiences that customers expect. If banks continue to tap into these technologies to drive the sustainability agenda, they can also realise significant long-term competitive advantages through attracting and retaining top talent and customers.”