Name: Banking on a better future: The road to 2050
Uploaded: 2023-02-02T11:52:23.908Z
Duration: 469.93

The Road to 2050 FINAL.mp4

Road to 2050.vtt

English

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It's going to require that banks deploy
their capital, just as they did in

{{00:00:04}}
financing the Industrial Revolution,
we're going to have to finance our

{{00:00:07}}
way through the path to net zero.

{{00:00:19}}
It's important to note that banks
are going to play a really important

{{00:00:22}}
role, maybe even a really unique
role on our road to net zero by 2050.

{{00:00:28}}
You know, we are involved in
all sorts of industries that are

{{00:00:31}}
going to have to decarbonise.

{{00:00:33}}
So we're involved in financing
transportation and mobility, buildings,

{{00:00:37}}
land use, agriculture, energy.

{{00:00:40}}
I mean, really there isn't an
area of the economy that banks

{{00:00:43}}
don't lend and provide capital to.

{{00:00:45}}
And all of those spaces are
going through transitions

{{00:00:48}}
towards being net zero.

{{00:00:50}}
So the question is how banks
are go- how good are banks

{{00:00:54}}
going to be at funding that?

{{00:00:55}}
And so what it means for a bank
to be net zero is a couple things.

{{00:00:58}}
One, just like any other
business, we need to be net

{{00:01:02}}
zero in our own operations.

{{00:01:04}}
So our own buildings, our own
employees, our own vendors and supply

{{00:01:08}}
chains, all have to be net zero.

{{00:01:11}}
And then as we are deploying
capital, we need to be deploying

{{00:01:14}}
that capital into things that are
renewably powering the world, in clean

{{00:01:18}}
energy, in renewable ways, and also
making our buildings and businesses

{{00:01:22}}
and organisations more efficient.

{{00:01:23}}
And how can banks reduce
their carbon footprint?

{{00:01:27}}
Well, it's a great question and again,
like any other business, we have to

{{00:01:31}}
be net zero in our own operations.

{{00:01:35}}
So that means first you want to
structure your organisation so

{{00:01:39}}
that it's as efficient as possible.

{{00:01:41}}
You want to renewably power it.

{{00:01:42}}
In our case, all of our
buildings have solar panels.

{{00:01:45}}
Many of them are geothermally heated.

{{00:01:47}}
And then you want to make
them as efficient as possible.

{{00:01:50}}
So you want to have LED lighting
and you want to insulate them well.

{{00:01:52}}
In our case, our buildings are
an all energy star certified.

{{00:01:57}}
But then that's probably not
going to get you to carbon

{{00:01:59}}
neutrality or net zero.

{{00:02:01}}
So then you're going to want
to track: how much carbon

{{00:02:04}}
are you really emitting?

{{00:02:05}}
Everything from employee commutes
to business travel to whatever

{{00:02:10}}
other things in your operations
might be generating carbon.

{{00:02:14}}
And in our case, we
buy carbon offset tags.

{{00:02:17}}
So what a carbon offset tag is, very
simply is, it's an investment that

{{00:02:21}}
is making a project happen somewhere
outside of your operation, has nothing

{{00:02:26}}
to do with your own operations,
but it's going to reduce carbon.

{{00:02:29}}
And so if you're measuring your
carbon output after you've done all

{{00:02:31}}
the things to become efficient, then
you buy these carbon offset tags and

{{00:02:35}}
that'll take care of the excess carbon
that you can't offset yourself, by

{{00:02:39}}
offsetting carbon somewhere else.

{{00:02:41}}
And a lot of banks and a lot of
organisations are claiming that

{{00:02:44}}
they're carbon neutral and operating
carbon neutral by doing that.

{{00:02:48}}
The biggest question though, for a
bank to be- and the most difficult

{{00:02:51}}
for a bank to become net zero is going
to be what are called scope three

{{00:02:56}}
emissions, sort of those emissions
that are related with our customers.

{{00:02:58}}
So, you imagine you're financing
a customer that has a business

{{00:03:02}}
that's pretty carbon intensive.

{{00:03:04}}
And having a conversation with
that customer about how they

{{00:03:07}}
can become less carbon emitting.

{{00:03:10}}
It's kind of an awkward, very
challenging conversation.

{{00:03:13}}
That's the most difficult part
for banks to become net zero.

{{00:03:17}}
There's some ways that that
might happen naturally, and

{{00:03:20}}
we can talk about that, but
that's the most difficult part.

{{00:03:22}}
And do you think that banks can
achieve net zero pledge by 2050?

{{00:03:27}}
Do you think that's even possible?

{{00:03:28}}
And if so, how?

{{00:03:30}}
How can they actually do that?

{{00:03:31}}
Well I do think it's possible.

{{00:03:33}}
And actually, those of us who
believe in the problem of a warming

{{00:03:36}}
climate and the effects of that,
I think it's actually mandatory.

{{00:03:39}}
I think we have to do that.

{{00:03:41}}
You know, banks are in the
risk taking business, right?

{{00:03:43}}
We lend out deposits that our
customers give us, and we have

{{00:03:47}}
very little margin for error.

{{00:03:49}}
We have very little margin for making
a mistake and lending in a way that

{{00:03:53}}
we're not going to get paid back.

{{00:03:55}}
And that's just been
banking since banking began.

{{00:03:59}}
So, as we deploy capital in ways
that are increasingly risk- that

{{00:04:04}}
make risk sense, factors like what's
happening to the climate are going to

{{00:04:09}}
have to be taken into that calculus.

{{00:04:11}}
And if you're lending in ways that
either aren't growing because they're

{{00:04:15}}
in businesses that are shrinking
because of the shift towards

{{00:04:19}}
renewable and renewable energy
and carbon reducing activities,

{{00:04:23}}
that's going to be a factor.

{{00:04:25}}
If you're- the risk of loss and the
volatility in your business because

{{00:04:29}}
you're in carbon emitting industries,
that that's becoming a greater factor.

{{00:04:35}}
Well, that's going to affect
the decision making of banks.

{{00:04:37}}
So you know, I think it is possible,
and actually I think it's going

{{00:04:42}}
to have to happen because the
risk factors are going to come

{{00:04:44}}
into play that are going to drive
banks to make different decisions.

{{00:04:47}}
You talked about what you
think is possible, which is

{{00:04:50}}
amazing, and I think we do have
to start making these changes.

{{00:04:55}}
But obviously banks and
financial institutions are still

{{00:04:58}}
funding oil and gas companies
despite their net zero pledge.

{{00:05:03}}
So is it possible to stop funding them?

{{00:05:06}}
Is is that really realistic?

{{00:05:08}}
It's a really, really good question.

{{00:05:10}}
So I'll answer in two parts.

{{00:05:13}}
First let's set aside the
reputational aspects of customers

{{00:05:17}}
who are doing business with banks,
may having a preference that your

{{00:05:21}}
bank does not lend oil and gas.

{{00:05:23}}
Let's set that aside for a second.

{{00:05:24}}
We'll come back to it.

{{00:05:25}}
Let's just talk about the
economic and risk decisions.

{{00:05:28}}
So, again, banks are going to, as
they're evaluating where to deploy

{{00:05:32}}
capital and make loans, they're
going to be looking at the health

{{00:05:35}}
of the industry, the growth of the
industry, the long-term prospects

{{00:05:39}}
of that industry, and the companies
within that industry, they're going

{{00:05:42}}
to be looking at the strength of
their balance sheets, what they're

{{00:05:45}}
deploying their capital into,
what their growth prospects are.

{{00:05:49}}
So I would say that most banks now
are in the mode of engaging with

{{00:05:53}}
their customers to try to help them
diversify in areas that are going to

{{00:05:58}}
be long lasting and more sustainable,
rather than just cutting them off.

{{00:06:02}}
And I think over time, the industry-
the oil and gas companies that, and

{{00:06:07}}
many of them are saying, they've
got big goals for diversifying into

{{00:06:11}}
renewable energy and carbon reducing
activities, you know, to the degree

{{00:06:15}}
that the industry is affected by that.

{{00:06:17}}
And growth comes from more of the
renewable sectors and the carbon

{{00:06:21}}
reducing sectors that then shift
their activities there, then I

{{00:06:24}}
think banks will stay with them.

{{00:06:25}}
Now, to the extent there are companies
that don't do that, and you also

{{00:06:29}}
see the fossil fuel industries, the
oil and gas industries, begin to

{{00:06:33}}
shrink, banks will come out because
of economic and risk decisions, right?

{{00:06:37}}
But let's go back to
the reputation risk.

{{00:06:39}}
A lot of consumers don't want their
deposits to go towards things that

{{00:06:44}}
are not lined with their values.

{{00:06:46}}
They don't want their bank to be
financing the fossil fuel industry,

{{00:06:49}}
and they're voting with their feet.

{{00:06:51}}
So, they're going to take their
deposits out of those banks

{{00:06:53}}
and move them into banks like
ours, and there's thankfully

{{00:06:57}}
more and more of us out there.

{{00:06:59}}
And so that's going to be an
interesting dynamic too, because

{{00:07:01}}
again, if a bank all of a sudden
is starting to feel pressure

{{00:07:05}}
because their depositors are not
willing to keep their hard-earned

{{00:07:09}}
deposits with them, that's going
to become a factor in whether or

{{00:07:12}}
not they're going to continue to
finance those things that their

{{00:07:14}}
depositors increasingly don't like.

{{00:07:16}}
Now the question is, how much
pressure does that actually

{{00:07:21}}
result in banks making decisions?

{{00:07:23}}
It's not very big yet, but one
could see a day where, as the

{{00:07:28}}
population ages and millennials
and Gen Z and younger people that

{{00:07:33}}
are really, really concerned about
the climate, increasingly become

{{00:07:36}}
more wealthy, they're going to
have a lot more economic clout

{{00:07:40}}
that could change the equation,
the decision equation for banks.

It's going to require that banks deploy
their capital, just as they did in

financing the Industrial Revolution,
we're going to have to finance our

It's important to note that banks
are going to play a really important

role, maybe even a really unique
role on our road to net zero by 2050.

You know, we are involved in
all sorts of industries that are

So we're involved in financing
transportation and mobility, buildings,

I mean, really there isn't an
area of the economy that banks

And all of those spaces are
going through transitions

So the question is how banks
are go- how good are banks

And so what it means for a bank
to be net zero is a couple things.

One, just like any other
business, we need to be net

So our own buildings, our own
employees, our own vendors and supply

And then as we are deploying
capital, we need to be deploying

that capital into things that are
renewably powering the world, in clean

energy, in renewable ways, and also
making our buildings and businesses

And how can banks reduce
their carbon footprint?

Well, it's a great question and again,
like any other business, we have to

So that means first you want to
structure your organisation so

In our case, all of our
buildings have solar panels.

And then you want to make
them as efficient as possible.

So you want to have LED lighting
and you want to insulate them well.

In our case, our buildings are
an all energy star certified.

But then that's probably not
going to get you to carbon

So then you're going to want
to track: how much carbon

Everything from employee commutes
to business travel to whatever

other things in your operations
might be generating carbon.

And in our case, we
buy carbon offset tags.

So what a carbon offset tag is, very
simply is, it's an investment that

is making a project happen somewhere
outside of your operation, has nothing

to do with your own operations,
but it's going to reduce carbon.

And so if you're measuring your
carbon output after you've done all

the things to become efficient, then
you buy these carbon offset tags and

that'll take care of the excess carbon
that you can't offset yourself, by

And a lot of banks and a lot of
organisations are claiming that

they're carbon neutral and operating
carbon neutral by doing that.

The biggest question though, for a
bank to be- and the most difficult

for a bank to become net zero is going
to be what are called scope three

emissions, sort of those emissions
that are related with our customers.

So, you imagine you're financing
a customer that has a business

And having a conversation with
that customer about how they

It's kind of an awkward, very
challenging conversation.

That's the most difficult part
for banks to become net zero.

There's some ways that that
might happen naturally, and

we can talk about that, but
that's the most difficult part.

And do you think that banks can
achieve net zero pledge by 2050?

And actually, those of us who
believe in the problem of a warming

climate and the effects of that,
I think it's actually mandatory.

You know, banks are in the
risk taking business, right?

We lend out deposits that our
customers give us, and we have

We have very little margin for making
a mistake and lending in a way that

And that's just been
banking since banking began.

So, as we deploy capital in ways
that are increasingly risk- that

make risk sense, factors like what's
happening to the climate are going to

And if you're lending in ways that
either aren't growing because they're

in businesses that are shrinking
because of the shift towards

renewable and renewable energy
and carbon reducing activities,

If you're- the risk of loss and the
volatility in your business because

you're in carbon emitting industries,
that that's becoming a greater factor.

Well, that's going to affect
the decision making of banks.

So you know, I think it is possible,
and actually I think it's going

to have to happen because the
risk factors are going to come

into play that are going to drive
banks to make different decisions.

You talked about what you
think is possible, which is

amazing, and I think we do have
to start making these changes.

But obviously banks and
financial institutions are still

funding oil and gas companies
despite their net zero pledge.

First let's set aside the
reputational aspects of customers

who are doing business with banks,
may having a preference that your

Expert Insight

The drive for net zero is going to touch every part of our lives, including finance. For banks, this means taking account not just of internal operations, but of where funds are going, for what purpose, and the third-party operations of financed clients... A net-zero minefield!

Jason MacDuff, Vice President of Greenpenny, sheds light on the road to 2050, and how banks can navigate these tricky turns to achieve sustainable futures for all.

Sustainability

Net Zero

carbon emissions

Sustainable finance

Green Banking

Jason MacDuff

Discover insights from other experts

President

When we think about reaching net zero, it might be coal, oil, or gas industries that spring to mind. But banks certainly have a journey to make on the road to 2050 - find out why.

The role of banks in net-zero

MacDuff outlines the sustainable features of his own bank, and explains how offsetting can make net zero possible.

How banks can reduce their carbon footprint

Remember those carbon-intensive industries we mentioned? Well, they're getting financed somehow! If banks are going to pledge to net zero, there are going to have to be some awkward conversations with clients.
