60%
of the public believe it isn’t too difficult
for individuals to help prevent climate
change.
In a separate survey of 7,237 consumers in the UK, examining
attitudes towards ethical and environmental issues, Allegra Strategies
found that almost 60 per cent of the public believe it isn’t too difficult
for individuals to help prevent climate change. This suggests that there
68%
of Britons say being seen as green is
the new way of ‘keeping up with the
Joneses’.
is a growing opportunity for savvy retail banks to take advantage of
consumers’ desires by addressing their current lack of understanding
about what options are available to them.
Two different strategies amongst retail banks can be observed:
the development of niche products or the development of a fully
36%
was the return delivered on shares with
the highest sustainability ratings rendered
in the past six years.
integrated approach. The dominant European players are following
the niche products strategy exploiting the growing “ethical consumer”
market and fully integrating sustainability principles across all their
products and services. Examples of these innovative companies
include the UK’s Co-operative Bank, now known as Co-operative
35%
of commercial banks in emerging markets
cite sustainability as a driver for new
business.
Financial Services (CFS) and South Africa’s Nedbank. In contrast, the
larger European banks such as HSBC and Barclays have responded
to the emerging sustainability theme by developing niche products
of global sustainability issues in terms of the investment activities,
rather than looking to overlay sustainability principles across
products and services of their trusted bank. We predict
all their products and services.
that far more than five per cent and possibly 10-15
per cent of revenues in the next five to ten years
It could be argued that the banking sector,
will be derived from these products and
which historically has been known
services, which will become increasingly
for conservatism and a heavily
commonplace across the industry.
regulated environment, has not
faced major sustainability issues
Big players will continue to introduce
perhaps in the same way as
sustainability dimensions into
the energy or the automotive
their product portfolio but the
sectors. However, the asset
impact on their balance sheets
management segment already
will be limited. Yet in a world of
has an established approach
increasing competitive intensity,
to managing sustainability in
any emerging opportunities
the context of its investment
for growth should not be
activities.
neglected.
Furthermore, it is end-consumers
Global attention towards major
who are demanding banking
environmental issues (e.g.
services, while at the same time
climate change, resource scarcity,
placing expectations upon their pension
increased prevalence of disasters),
trustees to manage their fiduciary duty to
societal divisions (polarisation of rich and
take account of the social and environmental
poor, globalisation) and ethical behaviours
performance of the funds they invest in. Funds
(governance, quality of management) driven by
under a socially responsible investment mandate
an increasingly ubiquitous online media will continue to
in Europe have grown exponentially in recent years reaching over
strengthen. This in turn will influence the competitive forces on large
a1 trillion and continue to grow. The best-performing fund out of
financial institutions due to consumer’s expectations. We expect this
more than 300 unit trusts in the UK last year was the Co-operative
to accelerate the integration of sustainability approaches into strategic
Insurance Services Sustainable Leaders Trust.
and tactical decision-making.
The fund returned almost 30 percent over the year, more than double
As emerging codes and guidance on sustainability become
both the FTSE All Share benchmark and the UK All Companies
formalised and accepted, regulatory measures will be introduced to
average. Furthermore, a study conducted jointly by the sustainability
set the standard for trailing-edge performance. This will be in a similar
rating agency Oekom Research and HypoVereinsbank shows that
vein to the Sarbanes-Oxley Act or Basel II, but focusing instead on
investment recommendations based on stockpicking derived from
sustainability matters.
sustainability criteria pay off. Shares with the highest sustainability
ratings rendered in the past six years delivered 35.8 percent return, Retail banking has a long way to go before sustainability issues are
while the overall market measured in terms of the MSCI world index genuinely driving new sources of revenue. In the main, sustainability
had a loss of 24 percent. activities remain in the domain of enhancing reputation and risk
management rather than being a new source of value creation.
We at Arthur D. Little expect that sustainability as a theme will grow
Nevertheless, large banks can learn from a number of smaller players
in importance for consumers when they buy financial products and
in the retail banking sector that have been pioneers in the development
services. Consumers are becoming savvier about the relevance
of products and services driven by sustainability. n
19 | ecoexecutive
Acumen Business.indd 19 18/4/08 15:20:34
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