ESG principles have come a long way. Formally introduced over twenty years ago in a 2004 UN report, they now provide us with a framework for securing a sustainable and equitable future.
These principles were endorsed by financial institutions from the outset, including the IFC and the World Bank Group. With their influence over global economic activity, financial institutions played a key role in fostering awareness of and support for action. And while many financial providers have taken significant action, there are signs of wavering amid what is a growing anti-ESG landscape.
We need to ensure this does not become a global trend. CRIF’s research finds 55% of European and US consumers aged 18-34 are more inclined to choose a financial advisor that protects the environment, versus just 44% of those aged 55 and over. It is therefore essential that the sector remains steadfast in its commitments, as failure to do so would undermine progress and risk alienating new generations of consumers.
The role of banks in advancing ESG
Given their central role within society, banks are well equipped to support sustainability initiatives through adapting investment choices, altering lending policies and shifting operational commitments.
There are many cases of leading by example. From pledging net zero by 2050 and using 100% renewable electricity, to expanding banking services to underserved communities and introducing ESG investment criteria, these efforts reflect an awareness that financial success and sustainability go hand-in-hand in influencing market dynamics, investor sentiment and customer trust.
A retreat from ESG
Despite this progress, signs of a retreat from ESG commitments have begun to appear, with backtracking on pledges made in the wake of the Paris Agreement and the UN Sustainable Development Goals.
Some have argued that a reduction in their own goals doesn’t stop them supporting their customers to live more sustainably, but we know that’s not enough; many expect institutions to embody the principles they promote.
There is a clear demand for banks to take a proactive role in ESG. Our research found that 59% of consumers are more likely to choose a provider that is a force for good, with over half (54%) wanting their providers to offer greener services.
A business case for ESG
There is a compelling business case for banks, insurers and other financial providers to strengthen their ESG initiatives. Younger consumers are at the forefront of driving demand for change and over half (55%) of this demographic are more inclined to choose financial providers that actively support sustainability.
The consequences of ignoring this demand are clear: one in 10 (13%) consumers told us they would switch to a new provider if their current one did not have robust environmental practices, rising to nearly one in five (19%) for those aged 18-34. In fact, 13% of this group say they have already made this switch due to providers not aligning with their values.
While there is a growing appetite for greener financial services across all age groups, with over half (54%) of consumers wanting their banks to be more responsible and ethical, and consequently offer environmentally-responsible services, meeting the needs of younger generations is key to reaching and retaining new customers.
Banks that prioritise ESG factors are perceived as more responsible and ethical, enhancing their brand reputation and customer loyalty.
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Looking at the long-term
There is sometimes a temptation to prioritise short-term profitability over long-term sustainability. This is especially true in times of economic uncertainty – a current reality for a number of markets across Europe. The UK continues to weather a cost of living storm, and across the continent a number of social and geopolitical factors are feeding into a continually precarious economic landscape.
However, financial institutions that neglect ESG risk losing customer trust, denting investor confidence, and stalling growth. More importantly, they could miss out on tapping into a rapidly growing market for net zero jobs. In the UK alone, the net zero economy grew by 10% in 2024 and generated £83 billion in gross value added.
Strategic integration is key to success. Banks can do this by adopting a transparent approach to communicating their ESG efforts, offering greener financial products and better engaging younger consumers.
Looking ahead
The financial sector has made strides in advancing ESG principles, but we can’t let this progress stall. From a consumer perspective, expectations are clear: people want financial institutions to play a leading role in achieving a sustainable future. In addition, ESG regulations are becoming more stringent globally, and banks need to comply to avoid penalties and ensure long-term sustainability.
Banks that remain steadfast in their sustainability commitments can not only contribute to a more ethical economy, but will also secure customer loyalty and success. We shouldn’t be asking whether financial institutions should embrace ESG, but rather whether they can afford not to.
Editor’s Note: The opinions expressed here by the authors are their own, not those of Impakter.com — Cover Photo Credit: Fred Rivett.
