One of my favourite events of the year is the CIO Summit organised by Johnny Spragg at CMC. I like it because it's very participative. Everyone attending gets deeply engaged in the different topics

At the opening of the most recent summit, the ice breaker was an Oxford Union style debate. The topic of the day was that banks need to change to survive. I was arguing for the motion. In trying to explain the reasons why banks must change, I decided to take a light-hearted approach.

I used the analogy of personal relationships to highlight the challenges incumbent institutions have in changing to accommodate new customer and market requirements.

In this analogy my wife asks, “why can't you be more Up-To-Date and attentive to my needs.” We have been in a relationship for a long time, so this might be serious.

I start parting my hair on the other side and put on a new jacket. Banks will recognise my ‘makeover’ as the equivalent of putting a new UI on the app and giving their bank branches a re-design.

But this superficial upgrade didn’t get the approval rating I was hoping for in my domestic NPS scorecard.

I needed to truly transform myself. I aim to get fit for purpose, so I jog around the block. But I stop at the pub on the way and start hanging out with some young hipsters. We drink Tequila, talk APIs and grow beards.

Learning about the merits of RESTful vs SOAP and getting better at darts, was progress in my eyes but not my wife’s. I invite her to meet them but onboarding our busy diaries was very obstructive. 

Finally, we arrange for a few of my new start-up friends to move in, but this doesn’t help. Their behaviour seems to be less compatible with the transformation my wife had in mind.

Marriage counselling boot camp followed.  A few new features and services surface and now we are enjoying a new lease of life in our relationship.  

Preparing banks for the next transformation

If you have been on the Banking Digital Transformation journey over the last ten years or so you will recognise the parallels. The stages of denial, superficial change and ultimately the hard process of fundamental transformation is easy to see in hindsight.

This recognition is useful because we are at the early stages of an even bigger wave that may well go through the same phases but this time the threat is even greater, and the timeline even shorter. Somehow, we are going to have to accelerate our response to the call to action this time round.

New challenges for financial markets and institutions

 I am talking about the challenges coming from environmental, social and governance demands as detailed in the UN SDGs, the FSB Taskforce on Climate Related Financial Disclosure (TCFD) and many more. The Bank of England’s Transition in Thinking paper from 2018  https://www.bankofengland.co.uk/prudential-regulation/publication/2018/transition-in-thinking-the-impact-of-climate-change-on-the-uk-banking-sector  summarised the problem and the readiness to change. 

This is not new

To be fair hard-bitten professionals across the financial services industry, climate scientists, supra-nationals and more have been trying to fix this for 20 years. In the last few years there has been significant progress.

Of particular relevance to both bank and fintech professionals is the work put into understanding risk exposures, identifying new opportunities and breaking down the barriers that stop capital flowing into places where it can help build a decarbonised economy. This work has come from the central banks, FSI Industry, regulators and supra-nationals such as the UN, WEF and bodies such as PRI https://www.unpri.org/ , Carbon Trust  https://www.carbontrust.com/home/ WBCSD  https://www.wbcsd.org/Overview/About-us/Vision2050/News/The-role-of-business-in-accelerating-systems-transformation   OECD, SASB and more. Thankfully their activities have been aggregated  by organisations such as the IMP+ACT Alliance https://impactmanagementproject.com/about/imp-act-alliance/

So, we are not in denial, and we are not exercising superficial change, but we are still struggling to make impact. It feels as though the rules and definitions are becoming established but the start of practical execution, via the “counselling and bootcamp” approach, is only just underway.

Sustainable Finance: the next wave of bank transformation

Many organisations just don’t know where to start to get “Future Fit” but there is an amazing organisation called Future Fit. They are a not for profit that offer the bootcamp for Sustainability, or as they put it, they help organisations set the right environmental and social ambitions, take better day-to-day decisions in pursuit of those ambitions, and explain your progress more effectively. They have tools for companies, investors and advisors and these practical  resources are made free through the creative commons process https://futurefitbusiness.org/resources/

In addition to participants like Future Fit we need a safe place to share, experiment and try out new ideas, new business models, products and services that build on these tools and standards. 

At Finextra we hope to play our part and enable positive change through innovation and collaboration. We have created a programme of content, workshops and an industry summit, designed to create actionable ESG strategies, and build the ecosystem of partnerships which will turn strategy into reality.

If you want to start getting fit for the future in a safe place with supportive and like minded individuals and corporations check out https://www.sustainablefinance.live/  and register your interest or share with colleagues.