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Three Takeaways from our Webinar on The Rise of Open Banking and Sustainable Investment

Our webinar on 23 February, looking at how open banking can deliver on environmental, social and governance (ESG) issues in the financial sector, drew on the fascinating insights of our three speakers: Louisa Harris, Head of Sustainability and Systems Change at Brandpie, Chirag Thakral, Senior Director and Global Deputy Head of Capgemini Research Institute for Financial Services, and Gavin Starks, Founder and CEO of Icebreaker One.

Leading the discussion was Rachael Kinsella, Editor –in Chief at iResearch Services.

The main message? That we need to do more – and quicker. The open banking model has exciting possibilities for driving sustainability – and we have the tools to make it happen – but we need an urgent cultural shift in the financial sector to help prevent environmental and economic collapse.

Central to driving to Net Zero are:

  • Education
  • Collaboration
  • Democratising data
  • Leadership
  • Orientation to action .

Let’s dive deeper into three broad takeaways from the webinar.

One – data is not enough

The panel discussed how important open banking – or open financial data – is. Better data flows and connectivity between banks, fintechs, and consumers that characterise open banking can transform how we work towards ESG goals by making data sharable and more accessible.

But data is not enough, said panelist Louisa Harris, revealing that the prevailing view in the financial sector is that better data and standardised reporting will lead to better decisions.

In an ideal world, she said, that would be right. But we are on track to miss the Paris target of 1.5°C warming, and the more worrying scenario is that we could be looking at over 3°C by the end of the century.

As panelist Gavin Starks warned, “that’s not a crisis; that’s a financial collapse.”

The message is we don’t have time to get everything right. What we need, says the panel, is action and leadership.

 “The data is not enough. You need great data, but you also need leadership and culture – and also a lot of courage to shift mindsets and make decisions.”  – Louisa Harris.

Two – ESG needs joined-up thinking

The panel agreed that we need more joined-up thinking rather than working in silos. It is about looking at the intersections between the finance sector, banks, FinTechs, the economy, policy, and citizens.

Collaboration is key. Everyone in a company needs to be involved in ESG, not just one department or individuals with expertise. Companies should work together rather than hold onto their data. Data sharing needs robust regulatory frameworks, of course. But the message from the panel is to be bolder.

Joined-up thinking is about how the elements of ESG intersect. Chirag Thakral discussed how open banking delivers both on the E and the S. New partnerships between big banks and FinTechs create new products that can serve hard-to-reach consumer segments, promoting financial inclusion.

Gavin Starks drew on connections between increasing energy efficiency and residents’ health – increase the first, and you get benefits for the second.

Similarly, the transition to Net Zero, says Louisa Harris, will impact labour market skills and standards, which need to be understood.

Understanding and acting on these intersections means greater collaboration. But it also involves deciding on our purpose and creating metrics around it. Is it just ROI or a broader impact?

As Gavin Starks argued, the financial risks of not acting are huge, with more than half of global gross domestic product (GDP) directly being moderately or highly dependent on nature, according to research by the World Economic Forum. “This is not a running error at the side of our business. It’s central to it.”

 “One of the biggest barriers to ESG is understanding and focus, and it’s leading to a questioning of what the ROI is for us.” Chirag Thakral.

Three – focusing on the right data and data flows

It comes down to what we measure, said Gavin Starks.

In an Open Energy system, we can use material information from machines – smart meters, wind turbines, power stations and solar panels – to measure actual outcomes and impacts linked to Net Zero.

One of the problems with ESG reporting is that it is incredibly complex. The banks play a huge role in this ecosystem. An example of our work, says Gavin Starks, is with Bankers for Net Zero. We’ve created a programme for small to medium sized enterprises (SMEs) where we can automate Scope 2 emissions in greenhouse gas aligned with the ECG protocol by providing access to energy data – for example, monthly billing, kilowatt hours and ideally, their intensity – continuously.

It enables us to start by doing one thing well – just like open banking. We can build trust frameworks to create data based on materiality – what ESG issues corporate leaders prioritize for the company – that is more assurable.

 “If we consider data to be a continuous flow between the real world or real economy data flow and the financial economy data flow, then they are quite divorced from each other right now, and we can bring them closer together today.”  – Gavin Starks.

It also means doing things in new ways, says Louisa Harris. Analysing impact is challenging, and we must get used to using qualitative and quantitative data to tell that story. It also means sharing what’s not working and what we don’t know, so we can inform action.

And finally, data flows should include everyone, Gavin Starks argued. Halving our consumption and doubling our renewables output over the next 10 to 20 years, which has to happen, means everyone needs access to the data.

“It really is something for everybody to lean into,” said Gavin Starks.

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