Digital Transformation: Innovating To Net Zero

In the face of the global climate crisis, the financial sector has a crucial role in both financing and accelerating progress. In light of the pressures facing the global economy, the UK now plans to be the world’s first net-zero aligned financial centre, with regulators pushing for commitments from private companies covering $130 trillion of financial assets.

The New Role Of Finance Firms

Altogether, firms representing 40% of global private financial assets have made commitments to “accelerating and mainstreaming the decarbonisation of the world economy and reaching net-zero emissions by 2050.” This will be backed up with new oversight and pressure from regulators.

As of 2023, the majority of large firms and financial services institutions in the UK need to start publishing detailed plans for how they intend to hit Net Zero. This includes clearly defined decarbonisation targets and tangible steps detailing the path to progress.

In an era where consumers and regulators are ever more sensitive to perceived greenwashing, these plans will need to be concrete, measurable, and achievable.

The Net Zero Challenge

Despite the encouraging rhetoric, moving to Net Zero is easier said than done, and progress in this sphere has been patchy for financial institutions.

According to recent research by Microsoft, at the current rate of progress, only 16% of financial institutions surveyed will reach Net Zero by 2050, which is significantly lower than the national average of 41%.

Clearly, change is needed. To honour promises, financial institutions will need to set robust milestones that contain explicit, quantitative commitments on their transition to a low-carbon economy.

This must start with examining key areas of environmental impact within the industry and setting strategies for how to reduce and eliminate emissions, backed up by processes and technologies to make these a reality.

The Role Of Sustainable Innovation

Digital technologies represent an increasingly important part of any organisation’s ability to shrink its climate footprint.

This includes applying existing technology to improve processes and performance from a sustainability point of view, as well as new, sustainability-specific tools (ClimaTech) to tackle emerging issues and meet targets.

Tools For Sustainable Change

There are a wide range of solutions available for firms to leverage in their move to decarbonise, including:

• Cloud operations and data management
• Carbon measurement tools
• Digital twins of physical networks
• AI analysis and automation
• Big data analytics
• Digitised communications

These tools can play a crucial role in pinpointing gaps, measuring impact, and accelerating progress, as well as revamping existing processes from a sustainable point of view.

Innovation Opportunity: The Sustainable IoT

With the expansion of ESG reporting, there is an ever-growing need for investors and stakeholders to track data on companies' non-financial performance.

The increased integration of the IoT (Internet of Things) is a cost-effective solution to the collection of ESG data at scale.

Smart devices and tracking tools can help to make the collection and reporting of ESG metrics more accurate and streamlined, covering factors such as:

• Carbon footprint
• Energy efficiency
• Water quality and usage
• Waste management
• Indoor air quality

Innovation Opportunity: Paperless Communications

Investing in remote communications to reduce travel emissions, reviewing data storage practices, and reducing reliance on physical documentation and communications are key steps.

Mailock is a tailor-made secure email solution for financial services businesses, allowing providers, advisers, and customers to communicate securely using a single system.

Mailock integrates with Unipass Identity, which is used by 8 out of 10 financial advisers in the UK, enabling organisations to demonstrate their commitment to sustainability as well as operational efficiency and security.

Stakeholders can send sensitive documents and forms to customers over an encrypted channel, directly to their inbox.

All customer replies are fully encrypted, including sensitive documents, which are protected on delivery and return.

This system is not only faster, but more secure and environmentally friendly than paper, giving providers a significant competitive advantage.

Innovation Opportunity: Automated KYC

Increased digitisation opens the door to removing manual processes altogether from some areas of your business, refocusing resources on value-add work and reducing emissions generated through auxiliary processes. Opportunities include:

• Reducing human error in KYC
• Shortening onboarding timelines
• Improving long-term compliance
• Enhancing overall scalability

Automated methods can cut down KYC (know-your-customer) onboarding from weeks to minutes, automating document review and screening to help banks focus on customer experience and growth while limiting pressure on compliance teams.

Customer-Facing Sustainability

As pressure grows on financial services organisations to meet their Net Zero commitments, firms will need to invest in new ways to measure, reduce, disclose, and optimise their emissions, without greenwashing.

To take a leadership role in the sustainable transition, leaders must prioritise not only operational changes that reduce emissions but those which demonstrate their commitments for customers and stakeholders.

Mailock is a secure, sustainable email solution designed specifically for the financial services industry. Mailock enables institutions to put sustainability at the heart of their processes and demonstrate their commitment to a better future for the planet.

Exchange files quickly and securely with advisers, clients, and customers, minimising the need for paper and reducing your emissions, in a click.

References:

Chancellor: UK will be the world’s first net zero financial centre, UK Government, 2021

The Global Emissions of The UK Financial Sector, WWF, 2021

Climate-related Financial Disclosures, FSB, 2022

The role of the financial sector in the UK’s net zero transition to be examined by MPs in new inquiry, Parliament, 2021

Accelerating the journey to net zero for Financial Services, Microsoft, 2021

Reviewed By:

Sabrina McClune, 05.06.24

Sam Kendall, 05.06.24