Climate change and the destruction of the environment are among the biggest global challenges of our time. Experts believe that the majority of the global warming of the past 50 years is due to the increase in anthropogenic greenhouse gases. Meanwhile, the Earth is almost at the “point of no return.” Therefore, drastic and immediate action is needed to ensure a sustainable future for all.
Under the EU's 2021-2027 long-term budget and the NextGenerationEU (NGEU) recovery fund in the wake of the pandemic, the EU plans to spend up to 605 billion euros on projects to address the climate crisis and 100 billion euros on biodiversity projects. Thirty percent of the capital needs are to be met through green bond issues. The European Investment Bank Group has also taken important steps as the “EU Climate Bank” to support change. (Source: European Investment Bank Group, Climate Bank Roadmap 2021-2025, November 2020)
In July 2021, the European Commission also launched an EU strategy for the financing of the transformation to a sustainable economy and for the further development of a sustainable financial system. This is because ESG-related measures and the transition to a lower-carbon economy will require an estimated investment of 1 trillion dollars per year.
From the perspective of political measures and legislation, Germany is one of the pioneers in Europe when it comes to achieving short and long-term goals in the area of sustainable finance. A strategy adopted by the German federal cabinet in May 2021 aims to mobilize urgently needed investments for climate protection and sustainability while addressing increasing climate risks to the financial system. The strategy represents a change of direction within the financial system, with the government in Berlin declaring climate protection and sustainability to be key guiding principles with the aim of making Germany a leading sustainable finance location.
To this end, the German government's Sustainability Advisory Council adopted 30 groundbreaking measures for sustainable finance in its final report “Shifting the Trillions – A sustainable financial system for the great transformation” at the beginning of 2021. These include the reallocation of the federal government's capital investments to sustainable forms of investment, sustainability labels for consumers (sustainability traffic lights), and new sustainability reporting requirements for companies.
Against this background, not only should financial institutions develop new sustainable business models, products, and services, introduce new risk measures, and adopt new technologies, but they should also become determined promoters of sustainable business practices. To do this, they must understand the financial risks and opportunities of their involvement and act accordingly. The financial sector, including the private banks, have “a special role to play here,” says Torsten Jäger, Director Sustainability at the Association of German Banks (BdB). “Because they are financing the economic transformation and can thus make a key contribution to achieving global and national climate targets.”
Legislators and regulators, in turn, have to recognize the role and potential of financial institutions in sustainable development. They should recognize how politicians can help the financial sector become a responsible and important enabler, rather than an inhibitor, of the change towards a climate-focused economy.
It is precisely with this intention of “taking responsibility seriously” that T-Systems has developed the “Syrah” sustainability dashboard, which all public and private organizations can use to define, visualize, measure, and monitor their sustainability indicators. This is just one example of how the Telekom subsidiary not only pays attention to “green” measures within its own company, but also supports its customers in achieving their sustainability goals.
Even as financial institutions are expected to adhere to sustainability norms, IT players can play an important role in helping them adopt new technologies in line with their sustainability postures and goals. According to a recent report by global management consultancy BearingPoint, financial institutions need to invest more in IT and push the use of trending technologies such as cloud, artificial intelligence, and robotic process automation. This will make it possible for them to penetrate the adoption of digitalization more, which, in turn, will enable more efficient business processes, greater automation coverage, and increased implementation of standard software as a cloud solutions to keep change-the-bank costs at a low level in the long term.
T-Systems, for instance, has recently partnered with 20 municipal administrations in Spain to create Syrah Sustainability. Our work on making the cloud greener is taking shape at the Biere data center in Saxony-Anhalt. And we have also helped a Chinese megacity reduce its CO2 emissions.
For an insightful discussion around the role of IT in Sustainable Finance, write to me.