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The global banking industry’s environmental, social and governance (ESG) revenue pool could be as high as €295 billion ($286 billion) over the next decade.
Global professional services firm Alvarez & Marsal (A&M) says NatWest ranks among the top European and US banks capitalizing on net-zero transformation opportunities, releasing the results of its inaugural Green PACE ranking, a proprietary study of the top 25 Ranked Banks in Europe and North America are using sustainability as a business opportunity.
Analysis by Alvarez & Marsal shows that UK banks are outperforming their European and US counterparts in the transition to net zero.
Today, global banks are complying with regulatory, investor and rating agency expectations as they go green. Maximizing the economic benefits of ESG in a competitive environment will require banks to deploy a broad range of sustainable finance and investment products, with credible net-zero initiatives for financed emissions. They also need to adopt customer-driven transformation planning and accompany customers in their operations by fully embracing innovation and digitalisation.
ambitious promise
A breakdown of the revenue pool by region shows that Europe and North America will account for 46% of the total revenue pool, or EUR 135 billion, driven by more ambitious commitments than Asia by 2030. ESG revenue opportunities represent 10% of current revenues for European and North American banks.
The report found that UK banks were outperforming their European and US counterparts in the transition to net-zero emissions, with NatWest topping the list with a margin of more than 10%. The strong performance of UK banks, and in particular NatWest, can be attributed to strong investment and commitment to the assessed capability areas, including green product offerings, aligning targets, customer orientation and engagement in transformational execution.
Asad Ahmed, Managing Director and Head of Middle East Financial Services at A&M, commented: “Regional financial institutions play a leading role in integrating ESG into their businesses – both as implementers of their own business models and as potential revenue generators as they contribute to the Customers deliver sustainable solutions. The elements of sustainability need to be fully integrated into banking – the way banks examine risk, the product offerings, and how the bank operates.”
four attributes
A&M’s Green PACE rankings are based on evaluating bank performance on four attributes that A&M believes will determine sustainability winners. these are:
• Green products: A&M researches whether banks offer a wide range of sustainable financial products, including bonds, loans and derivatives, for green and sustainability-related purposes. A&M estimates that the top 25 banks in Europe and the US have committed €13 trillion to sustainable finance by 2030, a figure that represents 37% of total bank assets or 15% of global GDP.
• Alignment to net zero: A&M benchmarked the bank’s net zero goals, including portfolio size, asset coverage, data quality and internal tools. A&M found that most banks have committed to phasing out coal finance in the EU/OECD by 2030 and globally by 2040, with a small number committing to an early exit. The A&M benchmark also shows that U.S. banks are more intense in their oil and gas financing emissions.
• Client Orientation and Insights: A&M tracks transition advice and analytics linking client transition operational solutions to financial business cases and custom insights.
• Execution of transition plans: A&M analyzed the bank’s involvement in operational execution through climate technology investments, innovative joint ventures and digital platforms.
business opportunity
Fernando de la Mora, managing director of Alvarez & Marsal, said: “Global banks have recognized that the transition to net-zero emissions need not be a thorn in their side, but a huge business opportunity. Sustainable Banking Strategies are evolving from regulatory and compliance driven to broader initiatives that provide clients with new revenue streams and innovative solutions.
“We are seeing more and more financial institutions putting sustainability at the heart of their business priorities. Our Green PACE rankings provide banking leaders with a new framework to help them leverage ESG as a business opportunity. “– trade arab news agency
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