Can banks clean up on the road to net zero?

When some of the world’s most senior bankers gather at the annual Sibos conference and exhibition organised by Swift, the bank-owned messaging and standards consortium, the majority of sessions have traditionally lived up to the full workmanlike title of the event: the Swift International Banking Operations Symposium.

Over the past dozen or so years, sessions on the use of non-Roman character sets in payment messages or inter-bank collaboration on anti-money laundering and suchlike have been leavened with more abstract topics, usually indicated by a question mark: How can banks harness the rapid development cycles of modern software development? Will banks evolve into a disembodied collection of APIs?

This introspective strand was evident at last year’s virtual event, with the shift to home-working and the post-pandemic structure of the industry at the front of everyone’s minds. Quite frankly, some sessions might as well have been called What’s going to happen to all the office buildings?

This year, also virtual – but doing a good job of pretending to be in Singapore, as it was scheduled to be – shifted things up a gear, focusing on the role banks can play in combating the threat of climate change by helping their clients transition to net zero emissions. The subject actually book-ended the event, with Noel Quinn, group chief executive of HSBC, talking about it at length in his opening address and Mark Carney, the former governor of the Bank of England who is now the United Nation’s Special Envoy for Climate Action and Finance revisiting the subject in the closing plenary session.

In April this year, Carney launched the Net-Zero Banking Alliance, setting out a strategy for the role of financial services in achieving net-zero, and several large banks have thrown their hat in the ring. There are considerable obstacles in their way – not least of which is a law passed in the state of Texas that prohibits giving government business to anyone that won’t work with the fossil fuel industries, which feature prominently in the state’s economy. For the lending banks, that could have serious implication for their fixed-income businesses – the US municipal bond market is a huge part of their lending activity. Nonetheless, JP Morgan has signed up to Carney’s side, and other US giants are likely to follow suit.

HSBC’s Quinn sees it as part of the bank’s advisory activity as well as its lending business: “The first objective is to help our clients transition from their current business model to a more sustainable one,” he said. “If we do that, then our balance sheet transitions too.” Simply withdrawing from investments in fossil fuels, or other industry segments, is not enough, he said. “I could do that, and then my balance sheet looks good – nicely sustainable: but I haven’t changed the world. I haven’t helped those clients move their businesses into a net-zero business model. My first response is to have dialogue with clients, understand their investment plans and help those investment plans become a reality so that they become net-zero by 2050. That’s how I’m trying to achieve our responsibility in today’s world.”

I’m normally deeply cynical about business leaders playing the social responsibility card – remember Goldman Sachs’ boss taking about “doing God’s work” during the financial crisis? Or Mark Zuckerberg talking about Facebook? – but Quinn, and Carney, make a plausible case

An example cited by Quinn is Green Aviation Fuel – also called Sustainable Aviation Fuel – which can reduce the carbon emissions of long-haul flights by as much as 80%, he said. Shell reckons that it can make aviation net-zero by 2050 using SAF, which is going some.

Bloor’s overarching theme is about the Mutable Business™, a concept that is predicated on organisations operating in a state of continuous evolution. What Quinn describes would be a key enabler for the petrochemical sector to attain such a state, and if HSBC and other banks can facilitate this, and contribute to saving the planet in the process, then sign me up.

But for now, I must go and listen again to the Sibos session on MLETR – the Model Law for Electronic Transferable Records – another UN initiative that is being adopted to improve trade flows by Bahrain, Singapore, Abu Dhabi and the G7 countries.

It’s niche now, but it’ll probably be commonplace in international electronic trade by the time we achieve net-zero.