There is an increasing volume of high-quality editorial content advocating the importance of sustainability for banks and financial institutions, large and small. And I will dutifully post same and on occasions will agree with the arguments from the environmental lobby.

The fact that they are noisy and well-intentioned does not mean that they are always right.

The day may yet come when a bank’s green credentials will result in consumer banking market share gains. Whisper it to the noisy green lobby: that day is some way off.

Speaking to my colleague Polly Bindman of sister title Energy Monitor at COP28 in Dubai, Eric Usher, secretary-general of the UN Environment Programme Finance Initiative, stressed that banks around the world remain committed to transitioning to net zero.

Usher is clear-sighted on why financial institutions remain committed to their net-zero goals, amidst this turbulence. “You have politics, and you have business – and the reality is ESG is good business.”

And it would be reasonable to conclude that no rational or commercially astute bank is going to give the impression that it is not committed to prioritising sustainability.

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By GlobalData

It is also rare to find any commentator suggesting that investing in ESG does not represent sound business sense.

It does not yet result in market share gains in the retail banking sector. And here I stress, retail banking – my comments relate solely to consumer banking.

Notwithstanding the rise in public awareness of sustainability as a key issue, consumer behaviour remains unchanged. It is not perhaps news that the green lobby wants to hear, but a bank’s ESG strategy ranks as only the 13th most important consideration, when it comes to choosing a banking provider.

GlobalData Consumer Banking survey

That simple stat comes courtesy of GlobalData’s global consumer banking survey.

An easy-to-use digital banking platform is the most important attribute for consumers when selecting a financial services provider. But consumers still like banks with a physical presence, given that visiting a branch is the most popular research method for consumers before choosing a new provider.

Support for ESG causes sees a steady decline as customers get older and no surprises there. Across all age segments, issues such as brand, loyalty and rewards, pricing, clear and simple products, access to branches and call centres, PFM tools, quick and easy problem resolution, all rank ahead of ESG.

Among the Gen Z sector, only 17% of respondents reference ESG policy as a consideration in their choice of banking provider. That figure falls to 13% for millennials, 10% for Gen X 7% for boomers and 5% for those in the older age segment.

ESG will become an increasingly important factor, as younger generations place great emphasis on social causes. But it does no harm to introduce some measure of context here and not to overplay the importance of sustainability, at least as regards current consumer behaviour.

That fact is amply demonstrated each quarter when one looks at the switching statistics. If ESG was quite as important as some suggest, ethical UK banks such as the Coop and Triodos would be making significant market share gains.

UK ethical lenders struggle to attract switchers

Spoiler alert-they are not. And in the case of Triodos in particular, that is no reflection on the bank. Triodos is an outstanding ethical lender. But it made a grand total of a net gain of just 102 customers in the three months to the end of June 2023, the most recent quarter for which brand-by-brand net gains and losses are to hand. The Coop actually lost a net 5,800 customers. In the quarter to the end of March 2023, Triodos gained 93 customers, while the Coop lost over 1,300.

In calendar year 2022, Triodos posted a net gain of just 1,170 switchers. In the same period, the Coop suffered a net loss of switchers each quarter, losing a net 17,410 customers over the year.

It would be fair to concede that I am most certainly in a minority among media colleagues in holding the view that the importance of ESG is being overblown. I am however far from being a lone voice. Senior retail bankers who have tried and failed to make a go of environmentally-themed products in the past are also allies. Thing is, they dare not say anything on the record that might suggest anything other than total support for all things green.

Analyst comment

My old ally and GlobalData analyst colleague Steven Walker, tells me:

“Not only does our consumer survey data suggest people don’t switch for ESG/ethical considerations. Our executive survey data suggests very few bank employees actually expect ESG to have a big impact on bank strategy. In fact, across the 18+ sectors GD covers in the survey, Banking & Payments executives were last out of all of them based on agreement with the statement “ESG will have a significant impact on your business in 2023”.  And even across industries – i.e. the aggregated responses – out of the top six strategic priorities in last two years, ESG had dropped from 2nd (in 2021) to last (in 2023).

“I’d go even further. Two years of being forced-fed ethical/ESG is leading to consumer resentment / backlash. I suspect there is a growing segment amid an economic slowdown, of people that don’t want to be told what they should do and want, and just want their bank to be a good bank.”

One additional point and another fact the green lobby will not like relates to a truly innovative launch, the carbon tracker and the carbon limit credit card. A small number of banks around the world made a great deal of noise when they launched a carbon tracker facility, enabling consumers to track their spend and the resultant environmental impact. Actual usage of the trackers has tended to be somewhat underwhelming with little evidence it has resulted in a change in consumer behaviour.

The carbon limit credit card

And to any of my younger media colleagues, who buy in to the sustainability lobby with more enthusiasm than this writer, all I would ask is how they are getting on with their carbon limit credit card?

There was an ambitious attempt to roll out the first credit card featuring not a cash credit card limit but a carbon limit. The launch was well publicised and the marketing campaign won awards for its creativity. There really is no excuse not to be aware of its availability in the market.

I have yet to meet anyone who is a cardholder, even among young colleagues who tell me I should be more supportive of green issues.

They would be the same car-owning friends and colleagues who regularly fly off on budget airlines and to hang with the carbon footprint. Meantime, the writer makes do with rail travel for Scotland-London commuting and membership of the Enterprise Car Club for when a car is required. If only I had a fiver for every time one of my left-leaning friends concocted an excuse why they could not manage without their family motor or why they could not take the train for a trip to Europe.

A bank’s sustainability strategy may yet in the end move the dial when it comes to retail banking market share. I would suggest that that day is some way in the distance.