Using Automation to Drive ESG and Sustainability in Banking and Financial Services

In the early years of my career, I worked at a global bank where corporate social responsibility (CSR) programs were a priority. We held many community-focused events and ran campaigns to become more energy efficient. These were usually local programs, but I was always interested in how they affected the larger organization. What impact did they have? How did they change the organization’s culture? Did our efforts make a difference? Today, that organization has expanded its CSR programs into a formal environmental, social, and governance (ESG) initiative.

My old employer isn’t unique. Many of the world’s biggest banks have launched ESG programs. TD Bank has announced plans to link senior executive compensation to ESG performance. Wells Fargo now has a 20-year agreement with a Florida-based company to purchase renewable energy. And it isn’t just the industry giants who are prioritizing ESG and sustainability. According to one study, more than 80% of banks surveyed made similar commitments.

We're seeing this trend accelerate across our customers: financial institutions of all sizes have made ESG commitments but face data and reporting challenges to deliver on these commitments.

The growing urgency of ESG compliance

There’s more to ESG than a glitzy public relations (PR) campaign. Companies simply can’t afford to get it wrong. Regulatory bodies like the European Union (EU) and the United States (U.S.) Securities and Exchange Commission are ramping up ESG oversight. And shareholder activists are pressuring corporate boards to focus on ESG and sustainability.

The stakes are high, and compliance is complex.

Earlier, I referred to how my former employer wanted to track energy consumption and become more efficient. That sounds straightforward, but it requires intensive data collection and analysis across hundreds of sub-entities and locations. Likewise, a bank that’s committed to green financing has to track clients’ field operations, carbon emissions, supply chain activities, and a score of other variables. It requires sourcing and analyzing a huge amount of data. It’s an enormous job—full of the type of difficult work that can be very error prone. But automation makes it easier.

Extending automation use cases to ESG

Automation can help banking and finance institutions turn their good intentions for ESG into a workable reality. Software robots can tackle a significant part of the workload to simplify ESG compliance. And many banking and financial institutions already work with software robots. Some UiPath customers are great examples:

• Firstsource uses UiPath automation to digitize loan documents and manage customer processes, reducing reliance on paper.

• İşbank leverages automation to process requests to postpone loan repayments for customers impacted by COVID-19.

• City National Bank used automation to reduce new client onboarding time from 10 minutes to less than one minute, significantly improving customer experience.

These and other examples show how banking and finance institutions are great at finding new ways to put automation to work for the greater good, including reducing cloud computing infrastructure by as much as 65% and building carbon footprint calculators. And they’re finding that ESG is one area where automation can be the key to long-term compliance.

An imperative that crosses industry lines

ESG compliance isn’t just a concern for banking and finance. In every industry, companies are making ESG commitments. And like their counterparts in banking and finance, they’re discovering that automation is essential to compliance—especially in areas such as reporting and auditing.

• ESG reporting: automation helps companies monitor and report ESG-related risks across their lending and investment portfolios. Software robots track a company’s performance against its key performance indicator (KPI) targets for ESG. These include tracking progress on environmental targets such as carbon emissions, and social KPIs such as workplace diversity. Automation also simplifies reporting on metrics for risk and control management, employee conduct, and cybersecurity.

• ESG auditing: auditing teams already have a lot on their to-do lists. The addition of ESG compliance responsibilities threatens to overload them. Automation can help. It assists in much of the sampling, monitoring, and assessment activities that drive a successful ESG auditing program. In fact, auditing teams may have already deployed automation to help in other areas of data collection and monitoring. Working with software robots to streamline and simplify ESG auditing is a natural fit.

Unique opportunities for ESG in banking and finance

Banking and financial services face a unique set of ESG challenges where automation can make the critical difference in successful compliance.

Green finance

With green finance, institutions face two key questions:

1. Which organizations within the ESG space to invest in

2. How organizations that are potential investment candidates are making good on their ESG commitments

In both cases, the financing organization must comb through a lot of data on carbon emissions, sustainability scores, supply chain relationships, and other factors. Software robots radically simplify locating and consolidating the required information.

Green mortgages

Many financial institutions are giving lower interest rates or additional principal for loans on green properties (those that are environmentally responsible and resource-efficient throughout their lifecycle). These green mortgages come with additional documentation and checks to ensure the property meets the lender’s specifications. Automation helps a lender verify data points to confirm that a property meets the lender’s green standards.

Investment research

ESG policies also shape investment strategies. As in the other areas we’ve discussed, automation plays an essential role. Robots pull information from prospectuses and quarterly and annual reports to check an investment’s compliance with ESG targets. They also research ESG scores and sustainability analyses from third parties, as well as media reports. Artificial intelligence (AI) models then summarize that information to provide portfolio managers the context they need to make responsible, purpose-driven investment decisions.

ESG policies help organizations do the right thing for the planet while doing the right thing for their business.

The organizations that show they mean what they say on ESG targets will

And the organizations that deploy automation now to address their ESG needs will be ready for new regulations and standards as they emerge.

Join the conversation

We plan to share more on our own ESG efforts in the months to come.

In the meantime, join me for our first ESG webinar on September 9, 2021.