Are Cloud Platforms The Future For Green Banking?

Key takeaways

• Times are changing, and more and more industries are relying on cloud infrastructure for various services.
• Cloud computing offers lower infrastructure costs and greater operational efficiency.
• After all, sustainability is achieved when well-informed, wise decisions are taken.

Times are changing, and more and more industries are relying on cloud infrastructure for various services. Last year, 88% of organizations across the world were using cloud services, which raked up to 90% this year, depicting a steady growth in the adoption of cloud services. However, the banking industry, owing to various challenges, needs to catch up in its adoption.

Amazon Web Services, Microsoft and Google are some of the major cloud service providers. It is estimated that over the next few years, 1 billion tonnes of carbon dioxide emission can be avoided by replacing current IT systems with cloud computing.

Climate change is ringing alarm bells across every sector of the economy, prompting companies to use sustainable measures. Realizing what potential cloud computing has, banking companies are becoming more open-minded toward the approach of green banking. Banks are put in a unique, influential position wherein they can control the money flow and ensure it is used for green business practices. 61% of bank customers in the UK expect their banks to create a more positive and sustainable impact on society. A survey conducted among banks in the Netherlands, United Kingdom, and Germany found that 31% of them were concerned about sustainable banking. Twenty-seven green banks were created across 12 countries in 2021; the number is supposed to increase in the years to come.

What is Green Banking? #

Simply put, green banking is the activity of investing in or funding projects aimed at sustainability and mitigating climate change. The banks which indulge in these activities are called green banks. These banks’ priority is to promote the growth of a climate-friendly economy rather than making profits. Some of these banks additionally help in uplifting the low-income group population. Equal income distribution can play a great role in sustainability and ensures that the money spent is used responsibly, utilized to its full potential, and returned. As a result, they focus on markets where there is less risk of default. Green banks promote cheaper and cleaner energy, rapid deployment and more investment.

In April 2021, the net-zero banking alliance was formed, committed to sustainability and performing based on a net zero target by 2050. This alliance was launched with 43 founding members, and by December 2021, the number went up to 98. However, 52 of these banks are located in Europe and the rest in North America. The banks are required to publish their progress each year. Surprisingly, Bangladesh Bank is one of the first Central Banks to promote Green Banking activities. In 2011, it issued clear guidelines and protocols for Green Banking activities to banks and NBFCs’; the deployment needs to be more cohesive and reach all the countries uniformly.

How Does The Cloud Benefit Green Banks? #

Let’s look at some data on why banks are looking forward to adopting the cloud; 42% is because of simplified IT infrastructure, 20% due to cost reduction, 17% for innovation, 15% for security, 4% due to a wide range of choice and flexibility and 2% for customer centricity. Cloud computing offers lower infrastructure costs and greater operational efficiency. Banks require massive data centers, which are really carbon-intensive. By replacing these data centers with the cloud, banking can be made much more sustainable and immune to physical losses. Since everything is online, these services must stay updated with the latest security threats, offering greater protection.

Moreover, this software uses computing power efficiently by minimizing the idle time of computers. However, the success lies in choosing the correct cloud computing model for each service area of the bank: SaaS is used for customer relationship management, PaaS for infrastructure development and testing, and IaaS enables banks to outsource their operations without personally buying the cloud services. The pandemic has made customers more eager to have services at their fingertips, and banks are obliged to keep up with the trend. Cloud gives banks access to software that lets them provide service to customers. They are part of the SaaS model, so banks fully control them. Some software, such as the Temenos Banking Cloud, can help banks track their carbon insights to align themselves to their ESG (Environmental, Social and Governance) goals. EQ bank is the first bank in Canada to be fully hosted on the cloud; it uses the Temenos Banking Cloud. The bank also recently announced that it has become carbon neutral. Another example is the Italian digital bank, Flower, which is a cloud-enabled carbon-neutral digital bank and the first bank in Italy to get a B-corp certification.

Conclusion #

The time is ripe for banks to consider their ESG goals. International calls for action are increasing the market demand for sustainable banking products. Moreover, economic policies worldwide promote the growth of a green economy. The sustainable finance market is worth over 30 trillion dollars! Some suggest that it might take 3.5 trillion dollars annually to transition into a green economy and reach net zero goals. This is associated with many ESG issues, and the banks must address that. The signatories of Principles for Responsible banking have addressed climate change, enhancing gender equality and financial inclusion as their primary ESG goals. We have understood the importance of cloud computing to achieve these goals. The involvement of teach giants like Google, Amazon and Microsoft reaffirms the belief that the cloud is the future of banking. However, we should recognize the challenges of a cloud-based system. Stakeholders worldwide must weigh the advantages against the disadvantages and decide wisely. After all, sustainability is achieved when well-informed, wise decisions are taken.

Related reading

• Cloud Banking: Leveraging Data For Valuable Insights
• 10 Myths about Cloud Computing
• 7 Ways Big Companies Handle Hybrid Cloud Hurdles

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Questions and answers

What is Green Banking? #

Simply put, green banking is the activity of investing in or funding projects aimed at sustainability and mitigating climate change. The banks which indulge in these activities are called green banks.

How Does The Cloud Benefit Green Banks? #

Let’s look at some data on why banks are looking forward to adopting the cloud; 42% is because of simplified IT infrastructure, 20% due to cost reduction, 17% for innovation, 15% for security, 4% due to a wide range of choice and flexibility and 2% for customer centricity.