Cloud computing will lower CO2 emissions by one billion tonnes over the next three years, writes Jerry Mulle, UK Managing Director at Ohpen.
Although the path towards digital transformation was embarked upon some time ago, the pressure for financial institutions to tackle new frontiers, such as ESG, is higher than ever.
What’s more, these highly relevant and crucial matters are often wrongly perceived as two independent hurdles to jump. But this is not necessarily the case. In fact, by increasing their rate of transformation, financial institutions may even find that they are able to hit both operational and ethical birds with one digital stone.
Key to banks’ ability to deliver more on both of these fronts is embracing cloud technology. Put simply, the benefits of smarter technology aren’t simply limited to faster speeds and reduced costs, but also expand into empowering institutions to be greener and achieve their ESG goals.
Employing such technology means that financial institutions will not only be able to provide services to their customers more efficiently, no matter where they are or when they need them, but also benefit from increased operational efficiency, lower costs and a reduced carbon footprint. In this way, rising technologies like the cloud are quickly becoming catalysts of change to render the industry more productive, innovative and environmentally friendly.
How does the cloud boost sustainability?
The FS industry’s controversial green reputation has the potential to be improved by cloud implementation. For instance, cloud computing, as outlined by figures from International Data Corp, is set to avert the emission of over 1 billion tonnes of CO2 between 2021 and 2024 given that, when compared with legacy IT systems which are reliant on in house datacentres, cloud set-ups are more energy-efficient. The result of this is a reduction in carbon emissions of up to 80 per cent, which goes a long way in contributing to institutions’ attainment of their sustainability goals.
The cloud provides superior energy efficiency. The majority of financial institutions are still running large rooms solely dedicated to their physical servers, which overheat and need constant air conditioning just to function properly. But, more efficient and modern cloud datacentres are constructed to adhere to modern standards, increasing emissions by only 6 per cent while bringing computer processing that is 6 times greater than legacy technology to the table, producing minimal waste and cost while providing vastly superior output.
The emissions and energy that financial institutions may emit and consume when migrating from one on-site datacentre to another are also greatly reduced in the transition from legacy to cloud systems. Banks and other FIs are even able to source greener and more sustainable data storage providers with more established reputations from within the group of green partners, granting them more control and visibility over how and where their systems are operated.
Lastly, migrating from old legacy systems to cloud-native platforms massively reduces operating costs. As data, server storage and performance power are increasingly becoming on-demand services, institutions are gaining the capacity to scale up and down catering to their own needs. As a result of this, more capital can be invested in better equipment as opposed to cooling down legacy servers, giving banks the opportunity to further increase their spending on technology that will increase their technological capacities and sustainability credentials.
There’s more to ESG than just the environment
On top of the environmental benefits, cloud technology also benefits the social and governance elements of FIs. In addition to smarter technology and honed efficiency, innovation also brings financial services into better stead to produce more ethically orientated and socially beneficial products by forcing the industry to reimagine how its legacy initiatives can be adapted to suit the digital sustainability-focused era.
This is already taking place in some regions of the world, such as the Netherlands, where banks are more easily able to collaborate with providers of sustainable finance that aim to assist homeowners, housing associations and schools. Providing such partners with cloud-based technology empowers them to automate and simplify some of the most labour-intensive points in a customer’s financial lifecycle, rendering the process more sustainable, accessible, and efficient.
The enhanced operational efficiency of cloud-native systems could also assist banks in identifying clients who are likely to encounter trouble during the credit risk evaluation process through improving predictive data analytics. This improved data also grants banks the ability to provide higher quality support for customers who have been made vulnerable as a result of the pandemic, aiding them in their financial planning.
The time has come for financial institutions to change up a gear when it comes to digital transformation. More than ever, stakeholders and customers are calling for better technology that both improves operations and customer services, as well as aligns with the sustainability and ESG targets of our time. Cloud-based technology provides a solution for both of these hurdles and has the potential to launch the financial services industry into the future.
The views and opinions expressed are not necessarily those of AltFi.