Despite 75% of global banks reporting the intention to increase environmental, social and governance (ESG) exposure, they are still developing the fundamentals of their overall ESG strategy, with half of them identifying lowering carbon emissions from their enterprises as their top ESG objective.
This is despite a growing need to adapt to the ever-increasing demand for ESG-related finance from corporates, as well as the risk of likely future regulation, according to a recent study of 250 ESG heads from global banks by Finastra.
Organizational ESG priorities vary globally – reducing their own carbon emissions is the primary ESG goal for 49% of global banks, followed by board and management alignment on sustainability initiatives (46%), according to the study.
Regionwise stacked
These stats are similar for banks in the Middle East. In Europe, a larger proportion (74%) are prioritising reduction in carbon emissions, followed by settling on definitions and terms (67%).
In APAC, the main priorities are securing longer-term funding internally (63%) and board and management alignment on sustainability initiatives (61%).
Appetite for green lending continues to soar – 3 out of 4 global banks plan to increase their exposure by more than 16% in the next 12-18 months or more.
“In an environment characterized by uncertainty, high inflation, fluctuating interest rates and recessionary risks, banks are under an increasing amount of pressure to drive operational costs down while continuing to improve how they serve their customers,” according to the study.
“The research also shows that ESG is continuing to expand throughout a bank’s internal operations and external offerings.
Major inflection points in recent years have had, and are still having, a dramatic impact on how financial services is evolving. “This is forcing institutions to reconsider how they manage risk, increase their agility, and fast-track innovation to evolve with new demands,” the study said.
