Environmental sustainability is fast becoming a priority for consumers, businesses, and governments. In fact, Forrester believes that we’re in the early stages of a green market revolution — a historic business opportunity, on par with the first and second industrial revolutions.
In response, leading financial services firms across banking, investment, and insurance have launched an array of green finance products and experiences to contribute to climate change goals. The sector is awash with green finance offerings! It’s tempting to jump on the bandwagon of green finance products and experiences, but the path to success isn’t easy or straightforward, especially considering the risk of greenwashing or a lukewarm market.
So where should you start? First and foremost, define what success means to you as a firm: Is it market adoption, environmental impact, or your own progress toward climate-related goals?
Take a cautious but open-minded approach to your green finance strategy, and align that strategy to the relative maturity and impact of potential products and experiences:
- Maturity. Understanding maturity will give your firm realistic expectations of market supply and adoption as well as potential for growth. A mature product or service could be in high demand, but the market for it could be saturated with competition. For instance, green bonds have a long tenure (on the market for 15 years), are in demand, and are governed by well-established standards such as the Climate Bonds Initiative. This makes them more mature than other green finance products.
- Environmental sustainability impact. Ultimately, green finance should help firms achieve their environmental sustainability objectives. Otherwise, firms risk having their initiatives labeled as pure greenwashing. This makes assessing the impact of green finance offerings paramount. For instance, the impact of green corporate loans is high because eligible companies will create new climate-related technologies, such as for waste management, and can contribute to financial services firms’ green lending KPIs.
To understand more about the factors that determine green finance products’ and experiences’ level of maturity and impact, risks, and opportunities, as well as the four paths that financial services firms can take, check out my latest report, How To Prioritize Investments In Green Finance Products And Experiences.