The OECD estimated that 6.9 trillion U.S. dollars of annual investment were needed between 2016 and 2030 to meet the SDGs. The United Nations, meanwhile, estimates that there is currently an annual funding gap of 2.5 trillion U.S. dollars. As pressure for both the public and private sector to take real action towards sustainable development mounts, banks are discovering that taking a responsible and sustainable approach to lending and operations can have huge financial benefits. Increasingly, investors are implementing environmental, social and governance (ESG) risk into their decision-making processes. Therefore, banks committed to supporting sustainability have a growing advantage against their competitors.
A growing number of banks are looking at their commercial loan portfolios and making decisions to reduce and, in some cases, stop funding for high-risk sectors such as coal, gas and oil. Banks are also increasing the amount they lend to projects which help transition clients into a more sustainable way of operating. Many banks also receive the majority, if not all of their operational electricity through renewable energy procurement, while simultaneously reducing the amount of greenhouse gas emissions (GHG). Banks are not only making and increasingly delivering on goals set, but are openly reporting on their emissions, water consumption, waste and energy portfolios.
It is not just financially beneficial goals that banks are committing to. As a part of the ESG targets, banks are looking to improve customer satisfaction, employee advocacy, employee gender diversity, commit more to communities and indigenous groups, as well as tackle and reduce financial crime and tax evasion.