Rather than seeing sustainability as a cost to be managed, banks should use the lockdown to reflect on strategy by focusing on topics such as Environmental, Social, and Governance (ESG) that increasing numbers of customers care about. This will help to attract new business, even during the Covid-19 crisis.
Bad news is everywhere for the banking sector, with talk of banks facing cut dividends, falling profits, and rising non-performing loans. However, not everyone is having such a difficult time.
In a rare moment of positivity, Dutch lender Bunq revealed that its SuperGreen card is off to a flying start since it launched on 2 April. Through a scheme designed to plant a tree for every €100 spent, Bunq customers are expected to have planted 144,000 trees with around $15.6m (€14.6m) spending. Bunq is now partnering with Mastercard to offer its SuperGreen card across Europe.
However, this is neither a fad, nor a blip on the market radar but part of a trend driven by generational shifts in customers. The largest driver of sustainability is the rise of millennial and Gen-Z buying power in financial services – two generational cohorts that will soon comprise 75% of all accounts and purchases.
GlobalData’s 2020 Banking and Payments Survey has found that consumers aged between 18-34 are 40% more likely on average to say that ‘supporting environmental and ethical causes’ is the most important attribute in a financial services firm. As well as demanding faster, cheaper, more convenient ways of managing their finances, they want the brands of the products they buy, especially in financial services, to align with their own beliefs.
GlobalData’s ESG thematic research has taken a deep look into the opportunities that ESG practices can give financial services. One of those has been the fund industry: ethical funds, for example, have grown increasingly, having outperformed non-ethical funds over the course of 2019, the last three years, and the last five years. Ethical funds are also popular with the industry itself, with banks able to charge premium fees for ethical funds due to their market novelty.
ESG funds have also proved more resistant to Covid-19 market shocks. Bloomberg data revealed that ESG funds on average fell half as much as non-ESG funds during the Covid-19 crisis, on part due to their non-dependence on the oil sector.