Unleashing technological potential for achieving net-zero goals in the MENA region

All financial services firms need to rapidly accelerate net-zero transformation in their operations. This requires being able to empirically measure, track and reduce emissions over time, all of which relies on best-in-class technologies. There is no achieving net zero without having the right tech stack which includes the right combination of technologies a company uses to build and run its operations.

Digital transformation can, without care and consideration, actually increase banks’ carbon footprint as increased utilization of tools like artificial intelligence (AI), distributed ledger technology (DLT) and advanced data analytics are computationally intensive and energy hungry.

But when net zero and data strategies are aligned and synergistic, they can be mutually supportive. Financial institutions cannot begin a credible net-zero journey without robust data on their current emissions. That means investing in the right data and software to baseline and track performance over time. The sophistication and affordability of software and analytics packages now available offer companies access to tools they would struggle to build themselves. Financial institutions already use robust methodologies to establish that their financial data is appropriately managed. Sustainability data, on the other hand, is handcrafted, scattered across spreadsheets and often hard to understand. That can be improved as a part of the wider transition to a more sophisticated data governance.

Operationally, financial institutions can radically cut energy use through digital transformation efforts they are already undertaking for efficiency and productivity gains. The shift from on-premise server farms to cloud computing, for example, can lead to energy efficiency improvements of over 90%. Cloud computing can reduce over one billion tons of carbon dioxide in the coming years compared with legacy IT systems according to the World Economic Forum (WEF).

The cloud infrastructure offered by “hyperscalers” is best-in-class in terms of energy efficiency, and significantly powered by renewable energy, at levels beyond what most companies could achieve themselves. These vendors have also invested in calculators and dashboards that provide transparency into the carbon impact of cloud usage, aiding financial institutions’ environmental, social, and governance (ESG) reporting.

Financial institutions can cut emissions related to their data and digital workflows through “green software” and "green IT”, which can help coding and computing infrastructure achieve maximal energy efficiency and limit unnecessary power usage through everything from network coordination and demand management to more power-efficient coding. Financial institutions could, as part of wider digital transformation plans, also invest in capabilities like smart offices and buildings, powered by sensors and the internet of things (IoT), which can improve energy performance by adjusting to occupancy levels.

Even automation, a key objective of digital transformation, can improve financial institution’s net-zero performance. Vastly reducing the labor time involved in routine and repetitive paperwork, particularly in the back-office automation can free up existing resources to focus on value-adding work. This includes dedicating more of staff's time to upskilling, training and delivering on net zero, digital technology and financial services, a trifecta of competencies that few people currently hold.

Given the outsized role of digital technology in reaching net zero, chief technology officers (CTOs) and chief information officers (CIOs) are critical to the transition journey in financial services. Putting in place the right technology framework for operational emissions will accelerate their journey to net zero and provide a foundation for complying with more demanding requirements in the future, especially those related to Scope 3-financed emissions. Ahead of the crucial COP28 gathering in 2023, CTOs and CIOs should take up the initiative, in a make-or-break decade for fighting climate change, to help the region’s financial industry take the lead. Understanding and acting on financed emissions is just around the corner. Successful banks will work toward encouraging their CTOs and CIOs to be the key enablers of this. Key considerations include:

• Link digital transformation to net zero: Financial institutions are already on a digital transformation journey and net zero should be part of their thinking while shaping important technology decisions. Shifting to energy-efficient cloud infrastructure, deepening engagement with high-performing ESG tech vendors, and investing in green software and green IT through hiring, upskilling and partnerships can help digital transformation and net-zero goals remain mutually supportive. Financial firms should also review their wider technology vendor ecosystem to help all partners pursue a credible net-zero path.
• Set the C-suite sustainability agenda: Sustainability affects every member of the executive leadership, from the chief financial officer's (CFO) investment decisions to the chief operating officer’s (COO) oversight of logistics and supply chains. Given the energy demands of digital technology, and the power of well-designed digital technology to lower emissions, CIOs and CTOs should take a leading role in shaping net-zero strategy and delivery. They can achieve this by rallying their organizations to advance net-zero goals and pursue more sustainable ways of doing business. Technology leaders should also strengthen their engagement with the chief sustainability officer (CSO) and related units and functions, so they move in lockstep.
• Create a net-zero talent plan and a fully backed function to deliver: While sustainability has become an increasingly important functional role, the number of people with skills spanning financial services, net zero and technology is small, especially in the MENA region. Financial institutions should focus on upskilling the existing workforce to deliver a credible net-zero agenda. This can be achieved by freeing up resources by investing in robotic process automation (RPA) and related tools to free up more time for staff who may be burdened by workloads that could be automated. Firms should also invest in the capabilities of their existing data analytics teams. Net zero is a journey, not a one-off project. It needs to be fully resourced.
• Deepen engagement with technology and software vendors: The number of software startups in climate-related data tools has increased rapidly in recent years, which can be overwhelming. The challenge for financial firms is to pick the right partners, especially when startups face uncertain futures during the current downturn. Locking into software provisioned by companies with an uncertain future is a procurement risk factor. Decision-makers should start by looking at their existing suite of providers since many cloud and software as a service (SaaS) companies are now offering ESG-related capabilities layered on top of their existing solutions.