Sibos 2022: Food, shelter, water

The idea of progress is the belief that human society gets better and better over time. But it’s hard to think about progress when we are facing unprecedented crisis after crisis.

Banks can play a crucial role in lifting people out of poverty

What can leaders do during such turbulent times? How can we instil hope and trust in an increasingly polarised society?

The world is at a critical juncture

Food, shelter, and water are barebone necessities for one’s survival. Access to such basics, along with the internet and healthcare, should be basic rights for the modern era. Yet, the statistics are startling:

• According to the United Nations, the world is not on track to achieve Sustainable Development Goal 2 (SDG2), zero hunger, by 2030. In fact, in 2020, approximately 720 to 811 million people went hungry (118 million more people than in the year prior). Unless we take bold actions, around 660 million people may face hunger in 2030. To put the crisis in perspective, this is close to double the current population of the United States.
• Water covers 70% of our beautiful blue marble. Unfortunately, water scarcity is an increasing problem on every continent. As reported by UN-Water, 2.3 billion people live in water-stressed countries, and 4 billion people (nearly two-thirds of the global population) experience severe water scarcity during at least one month of the year.

This is just the tip of the iceberg. The current impacts of climate change are putting our civilisation at heightened risk of reaching climate tipping points, a scenario where crossing intricate thresholds would trigger significant and irreversible changes in how our planet operates. It is an event – perhaps the event – that impacts not only those whose livelihood depends on water (e.g. farmers) and those who live in poor countries, but also the rest of human civilisation.

But what does banking have to do with it, you ask?

Money makes the world go round

Of the many roles that banks play, one of the most important ones is being the intermediary between depositors and borrowers. With great power comes great responsibility. Regardless of what form money takes, banks hold an outsized role in shaping our society. With intention, they can be at the forefront of change. By focusing on what the world needs, we can create a roadmap to a better future – together.

It all starts with trust.

Banking is a trust business

People will only use banking services if they trust that their money is safe in the bank, and when they make a payment, the money will be received. Ultimately, banks need to show that they have the consumers’ interests at heart.

This is where technology plays a crucial role: banks can leverage data analytics to better understand their customers and their needs, provide better and more personalised services, and make services more equitable and accessible.

A great example is Project REACh, which aims to expand credit access in underserved communities and lower the barriers to financial services. Major US banks including JP Morgan, US Bancorp, and Wells Fargo are among those working with the project.

Another Project REACh collaborator is Citi, which is set to launch two new pilot programmes. It plans to issue credit cards to people without credit scores by leveraging information such as the applicant’s income and spending habits to measure creditworthiness. In addition, the bank will also assist small business owners who are women, veterans, or from underrepresented communities to get credit by adapting their underwriting standards and through lower credit score thresholds.

By enabling financial inclusion, through new business models and partnerships, banks can play a crucial role in lifting people out of poverty and help break the cycle of inequality.

Towards a sustainable future

Despite pledges from the Net Zero Banking Alliance committing to aligning its members’ lending and investment portfolios with net-zero emissions by 2050, Citigroup, Wells Fargo, Goldman Sachs, and Bank of America spent a combined $137 billion on fossil fuel projects last year alone.

Yet, it can’t be clearer what needs to be done. Institutional investors need to shift away from carbon-intensive industries and vote with their wallets to help scale up and mature cutting-edge renewable technologies and transition the world to a low-carbon economy. Our industry needs long-term objectives on climate action and a clear framework to move away from fossil fuels.

Else, the pledges are nothing more than PR and empty promises, towards an increasingly unpredictable future that we can ill afford to gamble on.

A dividend for the present is a dividend for all

So how are banks looking to reinvent themselves for the 21st century?

Leaders need to do more than merely reacting to customer demands and competitive threats. Purpose needs to be integral to everything that we do, much like how DEI must be part of a successful company’s DNA.

Taking the necessary bold actions today will lay the foundation for tomorrow, and it is the only way that we can sustain and thrive through the turbulent times in an increasingly fragmented world.

About the author

Theodora (Theo) Lau is the founder of Unconventional Ventures. She is the co-author of Beyond Good and co-host of One Vision, a podcast on fintech and innovation.

She is also a regular contributor for top industry events and publications, including Harvard Business Review and Nikkei Asian Review.