Why have some of the largest banks in the world invested large sums of money to environmental and sustainability causes? Why did both Citigroup and Bank of America pledge to invest $50 billion each in alternative energy and conservation projects and – more important – work hard to meet these goals? Why are environmental and sustainability issues important to financial institutions? This does not appear to make sense. Sustainability should be unimportant to banks. They do not operate factories, use much energy or water, require their supply chain to use large quantities of raw materials, or emit much in the way of pollutants into the air or generate much solid waste or wastewater.
In reality, environmental and sustainability issues ranging from climate change to pollution abatement to alternative energy are important to financial institutions. Banks provide capital to all sectors of the economy for positive growth and results. As environmental and sustainability issues directly affect more businesses, they will similarly impact lending decisions, such as return on investment, risk, and facility and supply chain management.
Financial institutions recognize two phases to this issue. Investing in green projects, particularly doing so before the competition, represents a great business opportunity. Cities and now countries (i.e., China, India, Europe) crave greener buildings, smarter energy production and distribution, and cleaner transportation. Even areas in the US, such as PlaNYC 2030, understand this, too. Those with proven technologies and proper financing will have an advantage (and an opportunity to make money).
Environmental and sustainability issues – or more accurately, ignoring these issues – represent a potential financial risk. The UN Environmental Programme estimated that lost value of assets due to the impacts of climate change could total $1 trillion annually by 2040. This has got to be a worrisome figure for financial institutions who finance vulnerable assets, as well as for another industry, insurance.
Therefore these leading institutions are not investing in sustainability for public relations purposes or as charity. It is part of their dynamic corporate strategy. There is growing evidence that sustainability efforts correlate well with improved financial performance. A study by AT Kearney (http://www.atkearney.com/news-media/news-releases/) found that financial services providers focused on environmental and sustainability issues during the recent recession outperformed their competitors by 25% in terms of their market capitalization over a 6 month period.
CCES has the experience to help your firm develop a new or expand your current sustainability program to result in measureable, deliverable successes for you. Contact us at 914-584-6720 or karell@CCESworld.com.