The financial industry is rethinking its customers’ expectations, its diversity of thought, and its approach to technology. aware_ spoke with Deborah Montanus, Head of Sustainability at DG Nexolution, about sustainable banking and how the company is helping banks embrace the green movement.
Traditionally, the finance and banking sector’s corporate social responsibility efforts have not focused on the full spectrum of sustainability goals as defined in the United Nations Framework Convention on Climate Change (UNFCCC) Sustainable Development Goals (SDGs). The impact of increasingly obligatory reporting was also not given attention for a long time.
However, the industry is embracing the green and sustainability movement, both in its internal operations and in its service and financial product offerings to private and commercial clients.
With the United Nations (UN) Sustainable Development Goals (SDGs), the Paris climate targets, and the EU Commission’s Green Deal for a carbon-neutral Europe by 2050, sustainable finance is not only a priority for banks, but essential for Europe to achieve these goals (pwc).
Consumers are also demanding more sustainability from banks today: a recent study by TeamBank found that 53% of respondents would not trust a bank that did not make an environmental-social effort; and more than 90% of respondents place a high value on their bank’s CO2-neutral business operations, according to a customer survey by Euro Group Consulting.
Banks are strengthening their competitiveness by positioning themselves in an environment that consistently aligns their business models with predefined sustainability criteria and are developing sustainability risk management strategies and processes to ensure adequate protection from any unprecedented shortfalls in their finance portfolio. For example, more than 80% of banks worldwide are pursuing more responsible strategies, with an increased focus on environmental and social objectives, instead of non-transparent and unsustainable business models and investments (Mercer).
The financial industry needs to create a new way of doing business, which the service partner DG Nexolution is also pursuing.
The range of solutions provided by DG Nexolution includes future-proof services and products in the areas of payment, procurement, marketing, and digitization as well as the effective implementation of sustainability in companies; for example, through concepts for digital payment, efficient, digital materials procurement, intelligent marketing and customer loyalty programs and structured measures for achieving sustainability goals, e.g., through e-mobility solutions (DG Nexolution).
aware_ spoke with Deborah Montanus, Head of Sustainability at DG Nexolution, about sustainable banking and how the company is helping banks embrace the green movement.
aware_: What measures are being taken at DG Nexolution to operate more sustainably?
Deborah Montanus: DG Nexolution’s goal is to make its own business operations climate-neutral by 2026. To achieve this, we have defined a clear roadmap and established a community of practice across all business areas.
We also support the banks of the Volksbanken Raiffeisenbanken Cooperative Financial Network (gFG) on their way to climate-neutral business operations. With our “Mission CO2” calculator, banks can calculate their carbon footprint and we advise on the reduction, substitution and compensation of emissions. In order to enable transparency and orientation regarding sustainability topics in the gFG, we successfully launched the sustainability platform “Nachhaltigkeits-Portal” for German cooperative banks in partnership with the National Association of German Cooperative Banks (BVR) and a group of regional cooperative associations and banks in 2022.
We have also adopted sustainability management processes, which ensure that sustainability criteria are anchored in the procurement and delivery processes of all our products and services.
As an example, we are already converting our portfolio of payment cards for financial institutions to sustainable card materials, such as recycled PVC, ocean plastic and last year we launched the world’s first plastic free wooden card in partnership with Swiss Wood Solutions.
The same strategic intent is driving our e-mobility offering through our specialized subsidiary DRWZ Mobile, our sustainable bank branch building design, construction services offering and thousands of products eco-systems through our cooperative online shop “Genobuy”.
aware_: How does sustainable banking work? What makes it different from “conventional” banking?
Deborah Montanus: The main difference between sustainable and conventional banking is that the use and raising of funds in sustainable banking is not only profit driven, but entrenches a prioritization of environmental, social and governance (ESG) dimensions resulting in a triple bottom line strategy. As defined in the targets under the Paris Agreement as well as in the EU Green Deal amongst others, finance institutions play a key role in the sustainable transformation of society and companies.
Concrete examples are, on the one hand, the financing of renewable energies and, on the other hand, the possibility of compensating for one’s own CO2 emissions with emission certificates. We support the German Cooperative Banks on their way to climate-neutral business operations with our “Mission CO2 Calculator”, which already covers the areas of Scope 1 and Scope 2 as well as sub-areas of Scope 3.
aware_: As a consumer, how do I ensure that my money is invested for sustainable purposes?
Deborah Montanus: There are countless certificates and assessments of sustainable investments. There is obviously a strong need for comparability and compatibility of these standards and certification schemes. Inadequate sector or governmental regulation is a challenge that needs to be addressed to ensure that investors get adequate guidance at various levels of complexity of their target investments. The information published in sustainability reports by banks and companies is helpful. Companies are increasingly obliged to do so under the Corporate Sustainability Reporting Directive (CSRD) and the upcoming Corporate Sustainability Due Diligence Directive (CSDDD), and many publish the information voluntarily.
For investments, there are several voluntary standards, such as the Green Bond Principles of the International Capital Market Association (ICMA). This helps to identify sustainable investments, without being a sustainability expert.
aware_: Do profit and sustainability contrast with each other, or do they possibly go hand in hand?
Deborah Montanus: In my opinion, profit and sustainability are not opposites, but offer potential for new business models. Sustainability issues often open a win-win-win situation for banks, customers and the environment. Profitability is existential and remains a key criterion for day-to-day decision-making. However, the environment and social and governance issues are equally important.
In the future, business models and investments must be profitable, environmentally friendly and socially responsible at the same time. Successful business models typically combine the conceptual strength of “being different” with the implementation strength of “being better”. Sustainability can achieve both. To do this, it must become an integral part of the business model and generate material value.
Apart from that, customers are already making their purchasing decisions based on sustainable criteria and this will become increasingly important in the near future. At the same time, the regulatory and reporting obligations for banks in the area of sustainability are becoming more and more effective. For example, the EU Taxonomy regulation and supply chain due diligence regulations such as the CSDDD are becoming more important as the clients (especially end-consumers) increasingly base their contractual decisions on sustainability.
aware_: A look into the future: Will we eventually only pay digitally, by card and cashless?
Deborah Montanus: In Germany, more than every second person still prefers to pay in cash (58%). We thus lag far behind in a European comparison. However, cash has steadily lost importance in recent years and the importance of cash alternatives continues to grow.
Since the corona pandemic, contactless payment has become the absolute standard, so we urgently need to expand the infrastructure accordingly like a number of other countries already did.
In this respect, the trend is clearly set. We at DG Nexolution, are well-prepared for this development and already have solutions in our portfolio. With the digital Girocard or the digital debit or credit cards from Visa or MasterCard, we already offer our customers various solutions. Likewise, the possibility of contactless payment with cards or through wearables: These can be key fobs, watchstraps or payment rings with an integrated payment chip. In the end, it will be a matter of time before we pay exclusively digitally, with cards, smartphones or wearables and thus cashless. But there will be a coexistence of these solutions for a certain period.
– by Marie Klimczak