Industry16th May 2024

4 lessons from ClearBank’s sustainability journey (so far)

Sustainability blog
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Sustainability is one of four guiding priorities at ClearBank. As we gather momentum on our sustainability journey, we want to share some lessons we’re learning along the way, spark debate and identify opportunities for collaboration.

In many ways sustainability is best approached from a pre-competitive mindset, for its own value rather than to gain commercial advantage. Of course, there are material revenue opportunities to realise, but the big goals of sustainability are common between peers and across industries, and a spirit of collaboration and openness are critical to overcoming systemic challenges.

There are so many questions to address as we collectively strive for change. How can we better focus decarbonisation investment with imperfect emissions data? How can we combine skills and capabilities across organisations? What are the revenue opportunities to accelerate change? How do we make more sustainable decisions day to day?

Here are a few lessons we’ve learned so far, which begin to consider some of those questions.

1: Cast your net wide, but don’t treat carbon accounting as gospel

Carbon accounting is both complex and inaccurate, with Scope 3 emissions in particular causing headaches for banks, fintechs and corporates alike. These are the emissions that all our organisations are responsible for but fall outside of our direct control, for example upstream in our supply chain or downstream as our products are used. In financial services, Scope 3 emissions account for 99.98% total emissions, driven primarily by lending and investment activities.

>98% of ClearBank emissions are also Scope 3, although unusually for a bank we don’t lend or invest UK deposits, maintaining 100% liquidity for our clients. Most of our emissions are therefore upstream in our supply chain. However, only two suppliers provide us with emissions data specific to the products / services we have purchased. The immaturity of carbon accounting across financial services supply chains mean we rely on converting invoice spend data into emissions estimates.

This is an industry challenge to overcome and clearly our data needs improving, but how should we treat it now?

  • Measure everything you can to uncover material emission hot spots and set a baseline. Rely on recognised standards like GHG protocol, PCAF and SBTi to avoid greenwashing.
  • Deep-dive hot spots to understand the business context and opportunities; carbon accounting informs your decarbonisation strategy but must be tempered by more reliable inputs to validate investment.
  • Treat carbon accounting as a continuous activity, not an annual task. Board and Risk Committees need regular reporting to set risk tolerance, even if using proxy data.
  • Build a supplier engagement plan with your procurement team and embed expectations in procurement policy, tenders and commercials.
  • Be transparent in assumptions and unknowns. Transparency in what we don’t know, what we are doing about it, and helps to mitigate greenwashing risk.
  • Consider an independent audit of carbon accounting and Net Zero targets.

Is your organisation measuring its carbon emissions? If not, our partner Normative offers a free tool for companies with up to 50 employees.

2: Systemic challenges require collaborative solutions

In considering systemic challenges like climate overheating or wealth inequality, banks and fintechs are an important but discreet piece of the puzzle. Systemic challenges require broad collaborative responses, which these days many organisations want to be a part of.

However, organisations should be cautious about which initiatives they sign up to, with risk of limited impact or poor value for money. As with your overall sustainability mission, authenticity is key as consumers become weary of corporate “virtue signalling".

Over the past few months, ClearBank has been working on opportunities to influence and innovate through collaboration with peers and across industry. We identified Project Perseus as a good example, coordinated by Bankers for Net Zero and IceBreaker One. Perseus will create simple, automated emissions reporting for SMEs (which make up 50% of UK emissions), unlocking billions in green finance by helping banks and FinTechs to accurately understand the emissions of their customers and target lending and investment towards decarbonisation. If your organisation works with SMEs, you can get involved here.

As collaboration opportunities arise, consider asking the following questions:

  • Is this initiative relevant to your core business?
  • Are you bringing skills and expertise to the party or just along for the ride?
  • If there is a cost contribution, how will it be spent? Is it value for money?
  • What is the intended impact and how will you measure it?
  • Who are the other members? Would you be comfortable with them as a client or supplier?
3: Explore the commercial opportunities

There is plenty of research to show that more sustainable businesses outperform their peers, not least because sustainability requires good governance, which in turn increases business resilience. However, some level of short-term sacrifice is inherent in establishing more responsible business practices. The idea of win-win sustainability only gets you so far, which means robust governance and some tough conversations with internal teams. But this is where sustainability becomes meaningful, and it also gives rise to commercial opportunity.

Social and environmental products today are primarily focused on investment and lending, but what do sustainable payments and deposit accounts look like? Unlike lending and investment, there are no widely recognised standards for sustainable payments and accounts. The Reserve Bank of India has defined a framework for green deposit accounts, while the EU Payments Council is primarily focused on payments execution. The Dutch central bank, DNB, analysed the carbon lifecycle of cash in 2019, with an EACHA paper on digital payments lifecycle expected in this year. The Payments Association is currently working on the carbon lifecycle of payments.

All roads lead to ‘low carbon payments/accounts’ as consumers increasingly search out more sustainable products, and rightly so with incumbent providers’ legacy technology, manual processing and physical infrastructure greatly increasing per payment emissions compared to many challengers. For now, the greenwashing risk is very real, with increasing scrutiny from both the ASA and FCA. However, first movers that are confident their claims are clear, fair, and not misleading can capitalise on shifting consumer sentiment while the Current Account Switch Service (CASS) now enables discerning consumers to switch their accounts in minutes.

Consider the following in preparing your sustainable product proposition:

  • Invest in sustainability education for your product owners.
  • Address material impacts of your existing business model, rather than sustainability ‘on the side’, and consider how to influence consumer and industry behaviour.
  • Define your expected impacts and measure the outcomes.
  • Consider trusted 3rd party collaboration to establish proof of sustainability.
  • Recycled plastic cards is not a sustainability proposition.

For inspiration, take a look at some sustainability focused products already on the market like the Triodos ethical account, Go Henry child account, Engage financial inclusion account, Future Green cashback card, and The Cumberland apprentice account. Many banks and fintechs are also beginning to enrich payments data with emissions insights to nudge customers towards low carbon choices with tools like ecolytiq and Connect Earth.

4: Focus on embedding sustainability in meaningful decisions

With CSRD coming into scope for many organisations and biodiversity / natural capital working their way into bank and fintech lexicons, there is much focus on the annual disclosures. These play an important role in measuring progress and informing public policy and corporate and consumer decision making. However, there has been less discussion from fintechs on embedding sustainability in day-to-day decision making.

As we expand into Europe, ClearBank is mindful of both PRA and ECB / DNB expectations, beyond annual disclosure obligations. But what does that mean in practice? Depending on maturity, focus areas may include:

  • Complete a materiality assessment for your value chain. Every business model is different, this assessment gives you the insight to focus on what matters.
  • Prioritise integration with existing governance and frameworks ahead of new structures. Committee secretaries are you friends.
  • While sustainability data may be unfamiliar to leadership, regular metrics supported by discreet leadership training are essential tool to drive sustainable decision making.
  • Set Board targets for embedding sustainability in meaningful governance, providing a mandate and reducing resistance to change.
  • Include ESG risk types in your risk taxonomy, allowing Board and Exec level risk appetite statements to drive downstream governance adoption.
  • Agree accountability within functions, with named owners of sustainability targets.
  • Set expectations with suppliers through procurement policy, requests for tender and commercial terms.
  • Establish data driven product governance, which ensure that sustainability is a driver of major decision points across the product lifecycle.
Focused and authentic

With so many initiatives any company can engage with, the sheer scope of sustainability can be daunting. It’s certainly a challenge we have faced at ClearBank. Recognising that an effective sustainability mission must focus on ClearBank’s business model and be authentic to our culture and our stakeholders has been the foundation of any progress so far.

As you continue on this journey, think long-term. Begin narrow and build breadth over time. Most importantly, consider how your products and services contribute to social, environmental and economic resilience over the long-term. There is no one-size-fits-all approach, so much depends on your unique business model and your value chain.

But doing nothing is not an option.

Oliver Thornton is the Head of Sustainability at ClearBank. He joined the bank in 2021 and is responsible for sustainability across ClearBank’s end-to-end value chain. Oliver is a passionate advocate for responsible business, and works closely with our clients, investors, suppliers and all of our teams to maximise ClearBank’s positive impact. He has over 10 years’ experience leading large-scale transformations for major financial institutions and is educated in Law and Sustainable Finance.

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