In recent years, financial services worldwide, particularly in Europe, have been undergoing a transformation with increased attention paid to sustainability and innovative technologies. Investors are increasingly seeking to finance sustainable solutions to respond to regulators and meet customer expectations.

In addition to this pressure, the reporting requested and the quality of the benchmarks increased with a clearer framework, and the expected information regarding sustainability became more solid. As stakeholders step up their demands for greater transparency, the demands for realistic and auditable sustainability measures will be even greater.

Indeed, the growing range of themes linked to sustainable development, including biodiversity, transition, adaptation, and inclusive finance, play an increasingly important role, while the market for green, social, sustainable financial instruments linked to sustainable development (GIS) continues to grow rapidly.

Furthermore, the growing urgency to combat climate change is driving demand for climate risk management, voluntary carbon offsets, increasing consumer incentives and promoting sustainable cities, industries, and agriculture – reflecting a reinforced commitment to carbon neutrality.

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These trends reflect the increasingly holistic approach taken by the public and private sectors around the world towards sustainable finance and sustainability in general, as they commit to solving environmental and sustainability challenges constantly evolving.

Sustainable finance and technology in the European banking sector today

Globally, the logic behind innovative solutions embodies a paradigm shift aimed at encouraging actions by companies or countries to accelerate socio-economic transformation.

Innovative solutions, in this context, are neither inventions nor limited to technology, even if naturally, these are most often inventions focused on technologies.

The financial sector in Europe has sought to invest in these innovative technological solutions with creative approaches that integrate sustainability across global value chains.

These innovative solutions that integrate the environment are also challenges that modify well-established processes. These creative “green” technological solutions are applied to ecosystem services, products, processes, market approaches and organisational structures that should lead to improved sustainability, productivity and “sustainable” (ecological and economic).

Innovative solutions require thinking about the life cycle while integrating all aspects of sustainability: economic, social, and environmental and promoting partnerships across all value chains.

Indeed, in the financial sector, like any other sector, technology plays an essential role in enabling sustainable finance to intensify action in favour of climate commitments. European banks are using technology to deliver their ESG commitments in a way that improves sustainability credentials.

Emerging technologies such as artificial intelligence (AI), the Internet of Things (IoT), and blockchain are helping to overcome challenges in developing sustainable finance while improving accessibility, impact, and reach.

AI

AI, including machine learning, natural language processing, and generative AI, improves sustainability insights and assessments. The application of AI can unlock untapped value from large amounts of available data, helping to pave the way for more comprehensive and faster implementation and adoption of green and sustainable frameworks and practices in finance.

Predictive modelling techniques powered by machine learning can help develop risk models that consider sustainability risk factors. They can also help fill gaps in sustainability disclosures by using AI simulations to predict potential outcomes that would otherwise not be obvious.

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AI can also be used to detect inconsistencies in company reporting with other data sources to address money laundering concerns. These approaches, based on the intersection of data and AI techniques, provide a more solid basis for more informed decision-making and capital mobilisation regarding sustainability.

IoT

IoT and sensor technologies also include spatial information technologies and satellite remote sensing. More generally, they contribute to improving data collection and enable continuous monitoring and reporting of sustainability-related measures. Climate data collected from IoT devices and telemetry sensors is used to assess and verify the impact of large-scale sustainability projects, enabling proactive management of sustainability requirements. The proper use of IoT technologies can accelerate the transition to carbon-neutral banking and adaptation to climate change.

Certain banks are mainly studying two use cases. The first is specifically linked to sustainable buildings (and bank branch network) management using IoT. They collect real data from their employees, their devices, and their assets. This data also allows them to define KPIs and make the best decisions for “facility management”.

The second use case is customer-oriented to improve the customer experience while reducing costs. Banks are turning to IoT by using beacons to send personalised offers to customers, and they are no longer in bulk (less storage data) in particular.

Blockchain

Blockchain, this decentralised and secure electronic ledger often considered “the biggest technological upheaval in several decades”, is still in its infancy but promises countless applications that could simplify investments in sustainable development. Blockchain technologies support sustainable finance by improving data transparency, making claims irrefutable, and detecting inconsistencies in disclosures.

Blockchain digital identities and self-executing smart contracts add the ability to streamline consensus between parties undertaking climate finance streams, from verifying ESG measures to creating new sustainable finance products.

Solutions using blockchain capabilities fortify investor and market confidence through the prevention of greenwashing, heightened transparency, traceability, security, and efficiency. Future possibilities include the issuance of sovereign green bonds from governments, micro-credit and collateral security platforms, digital identity, and funds transfer infrastructures.

Collaboration and openness to the world of platforms, beyond European borders, with the ecosystem and the high-tech community will thus be able to make a great contribution to all these actors who truly aspire to a sustainable world considering consciousness, transparency, accountability, and the required degree of urgency towards a sustainable global economy.

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