(Finance) – The banks around the world are accelerating transition green, aware of their fundamental role in limiting global warming. To date, more than 160 banks worldwide, accounting for around 40% of global banking assets, have committed to a zero-emission investment portfolio by 2050.
The momentum it is therefore positive but, along this path, banks are facing major strategic challenges. A new study from Bain & Company points out that, among these, there is an urgent need to monitor more accurately and granularly the emissions relating to its portfolios and loans, assets that represent at least 95% of a bank’s overall carbon footprint.
“The critical task of measuring these emissions is critical to defining a long-term strategic approach. The companies that face this challenge decisively – the “pioneer banks” – will see their profits grow by 25-30%. Conversely, institutions that delay or adopt a passive approach, linked simply to compliance with regulatory requirements, will see profits erode by between 10% and 20%, “he explains. Rocco D’AcuntoSenior Partner and Global Expert of ESG in Financial Services at Bain & Company.
Therefore, banks need to invest in an emissions measurement system to help their clients make strategic decisions towards a sustainable transition. Moving quickly, the banks “pioneer” will be able to shift a much larger percentage of their portfolios to green assets and revenues, up to 85% by 2050. In turn, the cost of credit and funding will be far lower than those of slower competitors, who, for their greater exposure less innovative sectors and projects will be increasingly penalized by the risk of transition, by markets and by investors.
“In Italy”, D’Acunto continues,“ we foresee – as a consequence of the high fragmentation of the productive fabric and the lower capacity of SMEs to face structural changes in the production cycle – even greater polarization of the performance of financial institutions. Banks that will be able to immediately support their SME customers and production chains in the transition will achieve a long-term structural benefit, both in terms of higher revenues and lower cost of credit. Less active banks will undergo a progressive process of adverse selection on their loan portfolio and a structural deterioration in their cost of credit “.
“To seize this potential”, he concludes Charles FlourAssociate Partner of Bain & Company, “Banks will need to rapidly adopt a long-term horizon with a flexible strategy, implement a more granular approach to measuring and tracing emissions, review the customer offering model, the management process and credit governance and metrics for measuring the value generated “.