At the end of last year, COP26 spurred on a multitude of discussions around sustainability. Sustainable finance has been one of the ongoing conversations since then and, as a result, there's been growing pressure from consumers who want more sustainable options when it comes to banking. The spotlight has truly turned towards the financial services sector.
A new report from Mambu asks: Is the grass greener on the sustainable side?. The findings from 6,000 consumers on their attitudes to green finance highlight the increased popularity and need for more sustainable financial services.
It’s time for change
Almost three-quarters (72%) of surveyed customers in the UK said they are more satisfied with green financial services compared to traditional banking services, and globally 60% said they would like every financial service they use to be sustainable. Last year, The Global Sustainability Study 2021 found that 85% of consumers have already shifted their purchase behaviour to become more sustainable in the past five years.
Demand from consumers for a sustainable banking option is rising, and it won’t be slowing down anytime soon. Further supporting this, our report showed that in the UK 34% of consumers said that the availability of green financial services has become more important in the last five years. Globally, this figure rises to over half (57%) where consumers, as a whole, believe that green banking will become mainstream in the future.
Financial institutions must now try to understand exactly what customers are looking for.
We often hear that ‘communication is key’, and this couldn’t be more true when it comes to sustainable messaging. Nearly three-quarters of UK consumers think their current bank is guilty of ‘greenwashing’. This makes it difficult to gain trust in this area from consumers.
Although consumers are sceptical of banks that fail to practice what they preach – they do want to be proven wrong.
A key finding here is that only 24% of global consumers said they would like banks to attain a recognised mark of commitment to sustainability certified by an independent third party. Even fewer consumers care for banks publicly ranking themselves against a sustainability index and only 37 know what climate pledges their financial institution has committed to.
Consumers want to be educated on their bank’s sustainable efforts during the onboarding process - 45% of consumers in the UK agreed that this is how and when they’d prefer to be informed of a bank’s green practices. The report also found that a further 40% of people in the UK said they would like banks to create incentives or loyalty programmes for customers that reward them for making financial decisions that support the sustainability transition.
Consumers want their seat at the table
We don’t often see consumers being offered the chance to participate in the conversation when it comes to financial services. Usually, decisions on how money is invested and what products are being offered are ultimately made by the bank themselves. However, this could all be about to change, seeing as the majority of global consumers would like to have a say on how and where financial institutions spend their money so that these investments align with their personal values.
Consumers also want a direct say on the types of green financial products and services their financial institution is offering them. Mambu’s findings showed that the top two most sought after products in the UK were green credit cards and green savings accounts. Green mortgages came in at third, with 35% of UK consumers wanting these as well.
What can we expect from financial services going forward?
If banks want to facilitate the transition to green finance they need to invest in consumer education. Despite some consumers understanding the terms ‘green’ and ‘ethical’ finance, only 40% of consumers in the UK are familiar with the terms.
Increased demand globally for financial institutions to better communicate their sustainability commitments, shows that the industry must seek to understand how consumers want to learn about green initiatives. By tapping into this demand, banks can not only help their customers in the transition to green finance but will also gain valuable consumer insights.
Going forward financial services must pay attention to the need for more sustainable practices and offerings. They should do this by fixing the communication gap, educating their consumers on ethical and green finance, and then giving their consumers a seat at the product table, as well as a say on how their money is invested.