Why banks need to facilitate climate neutrality – and what kinds of new ecosystems will emerge as a result

The Role of Banks in the Transition to a Climate-Neutral Economy: Challenges and Opportunities

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6 minutes to read

Banks play a key role in the transformation to a climate-neutral economy. This presents a huge challenge for financial institutions, but is also a great opportunity: if they position themselves within corporate banking as financiers that facilitate the development of sustainable business models and resource-saving production lines, they’ll secure a significant competitive edge. Collaboration with technology and innovation service providers is important here.

The EU taxonomy is key to transforming the economy and financing sustainable businesses and projects. The regulation, which came into force in 2020, offers a binding definition of sustainable business and serves as a core instrument in the EU’s Sustainable Finance Action Plan. The regulation requires banks to report how their loans and investments affect the climate targets that have been defined. Some banks have also set themselves net-zero targets. This means that banks are faced with enormous challenges:

  • financing renewable energy projects, a sustainable supply chain and other environmentally friendly initiatives;
  • investing in companies and projects that have a positive impact on society and the environment; and
  • incorporating ESG goals into lending and investment decisions.

However, the EU taxonomy is just as challenging for the banks’ corporate clients. At the end of the day, they are also required to disclose the extent to which their key financial KPIs align with the taxonomy criteria. The problem here is that companies are often unable to provide this information in the required quality because they don’t have the data they need. They can’t offer concrete proof of the CO2 savings created by a new lighting concept or a sustainable building. The same goes for climate-neutral activities in manufacturing, such as purchasing new, intelligent machines. The lack of quantification is not just a problem for companies, but for banks too. After all, they need reliable figures for lending and risk controlling.

Powerful alliances of banks, innovation experts and companies: taking action as ecosystems

Banks are demonstrating how to resolve this dilemma and are often doing so by collaborating with technology companies and innovation experts like Zühlke – and thus by forming ‘ecosystems’. This enables them to not only support their clients with financing, but to also provide them with holistic support on their journey towards climate neutrality. They are positioning themselves as strategic partners who can help with tasks such as collecting and evaluating the relevant data using the right expert knowledge, IoT technologies and data platforms. This makes them an attractive financing partner – and also ensures that they are financing projects that adhere to the EU taxonomy. Last but not least, it enables them to collect data that is useful for evaluating other projects. 

An example of a powerful, ecosystem-based cooperation between several partners is the collaboration between Deutsche Bank Microsoft, the city of Bad Hersfeld and the company Urban Lighting Innovations, who are all working together to optimise the urban lighting concept . In this project, technology known as urban intelligence-as-a-service uses artificial intelligence to control street lighting. Sensors collect data about the weather, traffic and ambient light and adjust the lighting accordingly. The lights consist of LEDs, which have a much longer useful life than standard streetlamps. The expected effect, according to Deutsche Bank, is that Bad Hersfeld will likely be able to reduce its energy consumption by up to 90 percent – and significantly reduce its carbon footprint. Innovative technology aside, when creating the financing concept, the main focus was on its contribution to achieving ESG goals

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ESG meets digitalisation and Industry 4.0

Using digital technologies can also majorly assist corporate clients in achieving their climate targets. This applies, in particular, to manufacturing. According to the ‘Climate Effects of Digitalisation’ study by the digital association Bitkom, up to 64 megatons of CO2 can be saved by 2030 in this sector of the economy if digitalisation is accelerated – and 37 megatons can be saved at a moderate pace of digitalisation. Bitkom believes that automation in manufacturing is key to this. Under this approach, systems and machines, parts and their components are networked with each other and processes run independently while using as little in the way of materials and energy as possible. Virtual images (digital twins) of complete manufacturing and operating cycles also ensure that processes are first tested digitally instead in the real world – this opens up the potential for massive savings in terms of material, energy and resources.

Some companies have already started going down this path. They include the Siemens plant in Amberg, which was presented as a flagship project at the World Economic Forum. Siemens is introducing digital process analyses and measurements at the plant to achieve its self-imposed net-zero target by 2026. As a result, the factory has already reduced its Scope 1 greenhouse gas emissions (direct emissions) and Scope 2 emissions (indirect emissions that are caused by the products purchased, for instance) by 69 %.

Zühlke combines an ecosystem-focused approach with innovation and sustainability expertise

In recent months, Zühlke has facilitated tangible, measurable CO2 savings in a number of sustainability projects. Zühlke experts analysed the product life cycle assessment for IonField Systems – a provider of medical products in laboratory research – by using a ‘screening life cycle assessment’ (LCA) in line with ISO 14040. This involves the entire product life cycle, running from manufacture to packaging, transport and use through to the end of the life cycle, being analysed and the carbon footprint calculated. Using a comparison tool developed by Zühlke, IonField Systems can also adapt the LCA results depending on the use case and its parameters. The collaboration with Zühlke means that IonField Systems is now able to demonstrate that, in the majority of use cases, using their plasma cleaning technology instead of conventional single-use materials reduces the carbon footprint by 60 to 90 percent. Zühlke also demonstrated the current product version’s hotspots, which IonField Systems can use to make the next generation of plasma cleaning devices even more sustainable

A joint project with Deutsche Bahn saw the potential of green IT be determined, specific measures derived and a green IT community set up for efficient implementation. Within eight weeks, the Deutsche Bahn and Zühlke project team succeeded in strengthening the IT community and formulating seven specific measures for sustainable IT. Deutsche Bahn combined its own employees’ ideas and enthusiasm with Zühlke’s green IT expertise to help achieve its own sustainability goals even faster. Based on the positive outcome of the project, the CIO board gave the go-ahead for the further implementation of green IT, specifically, to execute the measures that had been identified and roll them out across the group.

Commerzbank’s ‘open:forum The Green Ecosystem’: Zühlke has been a partner from the very beginning

Specifically in the financial sector, Zühlke is involved in Commerzbank’s ‘open:forum The Green Ecosystem’. This took place in February 2023 for the first time and was aimed at the bank’s corporate clients, among other groups. Zühlke and its sustainability team have been on board as a partner from the very beginning. One key topic was the forward-looking interlocking of sustainability goals, digitalisation and financing.

All these examples show that an area as demanding as it is promising is emerging for banks at the interface between the megatrends of ESG, digitalisation and Industry 4.0: strategic partnerships with industrial companies, which have a positive impact on the climate protection goals of everyone involved. It is important for banks to launch pilot projects in this field before corporate clients, who urgently need to take action, start looking to collaborate with other, competent partners instead.

Jan-Philipp Koch
Contact person for Germany

Jan-Philipp Koch

Principal Business Developer

As an innovation partner, Jan-Philipp supports banks and other financial services companies in the development of data-driven business models and digital solutions and processes. He brings experience as a consultant from a technology and management consulting firm and thus extensive knowledge in the areas of Data, Machine Learning and Blockchain.

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Stefan Hirzel, Head of Banking, Zühlke Switzerland
Contact person for Switzerland

Stefan Hirzel

Managing Director Banking Switzerland

Stefan Hirzel has been at Zühlke since 2013 as a partner and Head of Banking Switzerland. His focus is on combining technology, business value and customer experience. Together with his team, he works day in, day out on innovations to drive forward Swiss banking.

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Myles Davidson, Zühlke UK, Director Business Development
Contact person for United Kingdom

Myles Davidson

Head of Sales Excellence UK & Partner

Myles Davidson is an experienced leader for the digital transformation of companies and product innovation. Significant experience in driving business initiatives on a local and international level in a complex and rapidly changing environment. Myles is known as trusted advisor for clients at C- and board-level for strategic questions around business innovation and technology.

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Ruchi Singhal
Contact person for Singapore

Ruchi Singhal

Business Development Director APAC

Ruchi is an experienced technologist with over 20 years of IT industry experience working with global financial institutions, enterprises, and start-ups. In her role, Ruchi has led interdisciplinary teams building & supporting successful digital solutions, products, and platforms for the financial services sector. She is passionate about solving complex business problems using innovative digital solutions to transform and grow businesses.

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