6 developments affecting the future of green banking

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Sustainability and climate change continue to have a significant impact on the business decisions of financial companies, from large banks coming under pressure to report on and reduce financed emissions, to fintechs introducing green features on their mobile apps to help customers live more sustainable lives.

Read more about these developments and other initiatives in green banking in our roundup.

New carbon offset program gives sustainability a boost

Corporate clients who are looking to neutralize their carbon footprint can further their sustainability efforts by becoming a commercial depositor in a new Citizens carbon offset program.

The program uses the interest generated from the corporation's deposit account to purchase credits for the corporation from four carbon offset registry markets, which support a range of environmentally friendly projects.

"Quality carbon offsets allow companies to compensate for emissions that they cannot yet reduce by allowing them to make an immediate impact as they scale sustainability programs," said Pat Nuzzo, head of commercial liquidity management at Citizens.

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Citizens offers carbon offsets to sustainability-focused corporate clients

Net-zero targets come under threat from crypto mining

The need to offset the potentially damaging impact of crypto mining on the environment is one of the key findings in a new White House report on cryptocurrencies.

"Depending on the energy intensity of the technology used, crypto assets could hinder broader efforts to achieve net-zero carbon pollution consistent with U.S. climate commitments and goals," said the White House.

The report tasks the EPA, the Department of Energy and other agencies with leading the effort to establish standards for crypto mining that use less energy, but notes that executive action or legislation are options that should also be considered.

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Crypto mining could harm U.S. climate policy, White House report warns

Green features on fintech apps help push sustainability

Living more sustainably and reducing one's carbon footprint are increasingly top of mind for a growing number of people around the world, who expect a similar 'green' focus from their financial institutions.

In response, a number of fintechs and challenger banks are introducing features on their mobile apps, such as carbon footprint calculators, that can help customers lead more sustainable lives and reduce their impact on the environment.

While data and coverage gaps exist, Cathryn Peirce, co-founder and CEO of Carbon Zero Financial, compares the technology to her Fitbit: "I have no idea if I actually took that number of steps, but I do know that it helps me be conscious of my behaviors and benchmark progress."

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Climate fintechs are cropping up to fill a gap in green banking

Decarbonization fund to serve low-income communities

Community development financial institutions (CDFIs) in New York state will receive backing to the tune of $250 million in a NY Green Bank "community decarbonization fund" that will ensure underserved communities also benefit from the state's clean energy initiative.

"Partnerships like [the one with NY Green Bank]... will drive more resources to the low-income communities that are often disproportionately impacted by the effects of climate change and cost burdened by their energy needs," said Mary Scott Balys of Opportunity Finance Network.

In the last decade, NY Green Bank has invested upwards of $1.7 billion in 105 financial deals and anticipates launching its new $250 million fund in early 2023.

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NY Green Bank's new fund will finance clean energy in underserved areas

Pressure grows on banks to account for financed emissions

A survey of large banks around the world conducted by consulting firm Bain reveals that 65% are committed to reaching net-zero emissions by 2050.

But while many are able to report on the Greenhouse Gas Protocol's Scope 1 and Scope 2 emissions for their own direct and indirect emissions, respectively, few can account for Scope 3 emissions that are the indirect result of them financing companies that emit greenhouse gas.

"Banks are under pressure and face growing scrutiny, not just of their Scope 3 financed emissions, but to answer calls for increasingly specific commitments and actions that demonstrate momentum to actually reduce those measurements," said Michael Kochan, a Bain partner and co-author of the report.

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Financed emissions are banks' latest climate-change challenge

Bank sustainability programs drive action on climate change

A growing number of banks are offering their corporate clients new sustainability programs with a view towards persuading them that certain economic changes in their business practices, such as eliminating paper checks, can help shift the dial in the climate crisis.

"We can tell the client: 'Here are the highest areas of carbon footprint, and there are the digital solutions for that,' " said Carl Slabicki, co-head of global payments and treasury services at BNY Mellon.

BNY Mellon's paper reduction program offering fee waivers and discounts for clients that shift from paper to digital payments, Mastercard's carbon footprint-based payments that provides clients with carbon offsets, and Visa's Eco Benefits sustainability-focused perks are among the latest initiatives.

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Banks, payment companies battle climate change with incentives