The Intergovernmental Panel on Climate Change recently released the first part of its Sixth Assessment Report. Additionally, this month the 26th UN Climate Change conference, COP26, will open its doors in Glasgow.
These two events – already highlights in the global climate crisis calendar – share the stark and unequivocal message: that climate change is widespread, rapid and intensifying, and that this time represents our last chance to get runaway climate change under control through collective action.
We can expect that the unique urgency facing world leaders at COP26 will manifest itself in an agreement that commits to ambitious targets aimed at reaching global net-zero emissions, and that governments, business and civil society will come under increased pressure to find and implement the practical solutions necessary to reduce emissions.
We know that business leaders want to make a positive contribution; the challenge is always converting these intentions into achievable actions. The primary drivers for action in business are either significant opportunity or existential threat – and it is often far easier to make the case for transformative business change in the face of existential threat.
The financial industry is at a confluence of opportunity and threat with regard to the climate crisis. Certainly, the UN and world leaders at COP26 have their sights trained on the role that financial institutions must play in unleashing the trillions of dollars in private and public sector finance required to secure global net zero.
Then there are the environmental, social and governance standards impacting on how we do business as well as how we invest – essentially a value proposition that assesses a company’s ability to safeguard and sustain long-term success.
Finally, there is the ongoing imperative of digital business transformation in the financial industry as well as in the industry sectors it touches.
Too often these aspects of business are considered and administered separately. Public policy and government affairs are the responsibility of one part of the business.
ESG is an important adjunct to investor relations, yet still too often regarded as the means to present an organisation’s credentials rather than an opportunity to adopt new ways of working. Digital business transformation is associated solely with technological change rather than, as it should be, a holistic approach to altering the way an organisation thinks, organises, operates and behaves.
The financial industry – encompassing retail financial services as well as the financial intermediary market – is exceptionally well-placed to bring these strands together.
By completing and sustaining the shift from physical products and services to digital, and by ensuring that it and the companies it works with adopt only those digital technologies that minimise the environmental footprint, the financial industry can implement practical solutions to redress the climate emergency while at the same time realising value for companies and investors.
The Covid-19 pandemic showed how readily consumers can make the shift from physical to digital. The volume and value of cash withdrawn from Link ATMs fell by 60 per cent in March 2020 compared with the same period in 2019, while contactless payments increased by 44 per cent during lockdown and payments made by smartphones and digital devices also increased.