How the cloud helps companies reach their ESG goals while embracing a global outlook

ESG is moving steadily towards the top of the agenda for many banks and financial institutions, encouraged by an environmentally minded consumer base and an increasingly stringent regulatory environment.

The cloud allows banks to get leaner and greener

In the immediate wake of COP27 in Egypt, there is likely to be additional pressure to ratchet up efforts to meet sustainability goals.

Reaching ESG goals can be viewed through one lens as an exercise in becoming more domestically focused. Indeed, travelling around the world and having a global reach can significantly increase a company’s carbon footprint.

However, the world is still becoming an increasingly interconnected place – families and friends live abroad and need access to the same resources for sending and receiving money, travelling back and forth, or video calling in the meantime. There are a range of tools out there making global lifestyles easier – and that interconnectedness is here to stay.

So how can banks and fintechs better work towards ESG goals while serving a global consumer base with an appetite for living and travelling around the world? One understated yet highly impactful solution could be found in cloud-based core banking and utilising cloud-based Software-as-a-Service (SaaS) products.

How cloud-based core banking impacts ESG goals

Banks and fintechs are extremely familiar with the overarching benefits of the cloud; it can improve business operations and allow companies to innovate more quickly, saving both time and money while better serving customers. ESG is a lesser discussed yet equally good reason to consider making the switch.

Switching to the cloud is, in essence, moving from an on-premise data storage centre to an off-site consolidated data centre, which drastically improves banks’ energy efficiency. This is because cloud-based systems use space more economically; they have a smaller physical footprint, use less raw materials, and require less power to run. At the same time, they have an optimised technological capacity, which means things run more quickly and efficiently.

Cloud-based core banking providers are also the best solution for companies looking to scale globally. Usually, a bank looking to operate in a new region would need to set up a locally hosted data centre – once again consuming more resources. A cloud-based provider already has these set up, meaning that scaling overseas is as simple as tapping into an existing centre.

This reduces the environmental impact of global expansion and means banks and businesses can simultaneously grow and serve customers without having a disproportionate impact on the local environment.

At the same time, banks gain access to a range of new products and services (SaaS) directly from their cloud-based provider. SaaS is a great way for banks to innovate more quickly and take advantage of technology that has taken years for other expert providers to build – all while becoming greener and more sustainable.

In short, cloud-based core banking systems eliminate the need for banks to host sprawling data centres of their own, reducing their impact on the environment while simultaneously enhancing innovation and improving IT development and performance.

The environmental benefits of cloud-based systems are more than a theory; they have been tried and tested. Overall, data suggests that banks that adopt cloud-based infrastructure generate around 95% less carbon emissions than competitors who continue to use a locally hosted system. And while data centres are not the only source of carbon emissions that banks produce, reducing emissions in this way is highly impactful.

The data centre industry currently accounts for around 4% of global electricity consumption and 1% of greenhouse gas emissions worldwide, according to The Shift Project. It is also projected to account for 3.2% of electricity demand within the EU by 2030, according to the European Commission. By switching to a cloud-based platform and consolidating your data centres into one central source, banks can automatically become greener and more energy efficient.

As mentioned above, ESG goals are taking on renewed importance for banks and financial institutions in part due to intra-national efforts to combat climate change. Events like COP27 inspire innovation, but they also invite new regulation that holds companies accountable for taking climate action.

As new regulatory requirements emerge, banks who leave ESG on the back burner will be forced to prioritise finding solutions. The cloud is an obvious choice because it simultaneously allows banks to innovate more quickly, operate more sustainably around the world, and keep up with cloud-native fintechs who are competing for their customers.

Cloud-based platforms enable banks and businesses to leverage their infrastructure quickly and seamlessly to bring more value to customers. Banks who choose cloud-based core banking gain the added benefit of unlocking the potential of embedded finance, which is only becoming a more dominant feature of the industry.

While there’s no quick fix for achieving ESG goals, cloud-based core banking is an excellent place to start. The cloud allows banks to get leaner and greener, achieve greater operational efficiency, deliver innovation at pace to better serve customers, and have peace of mind that their global approach remains sustainable, all from making one simple switch.