Mahi Sall, Advisor, Fintech-Bank Partnerships, Payments and Financial Inclusivity
January 25th, 2023
Mahi Sall is the CEO & Founder of FinXpair, a Berlin-based strategic advisory boutique firm focu[...]
Survey Results: Unlocking Green Growth Opportunities for Retail Banks
McKinsey | William Edwards, Ritesh Jain, Marie-Claude Nadeau, Charlotte Soehner, and Daniel Stephens | Apr 21, 2023
Image: McKinsey & Company
A recent survey by McKinsey shows there is a meaningful and growing appetite among American consumers for climate-linked financial products
- BUT consumers need further education and advice to make informed buying decisions, and providers need to differentiate themselves from the pack. Generic environmental, social, and governance (ESG) offers will not be enough to win in this changing landscape. Will financial institutions provide the education consumers require and the differentiated offerings needed to win this space?
See: Mark Carney’s Climate Alliance Provides Billions for New Fossil Fuel Projects
- 1. Demand for green financial products is both strong and broad—and is not limited to a niche segment
- Nearly 40 percent of US consumers report interest in enrolling in a climate-linked financial product (Exhibit 1).
- Of the interested consumers, the majority see this as a potentially major change in behavior and two in three would allocate more than 40 percent of their savings or monthly credit card spending to a green retail banking product.
- Green banking products are attractive to consumers across income levels and community types
- Interest appears consistent across levels of household savings
- 2. Green offerings are a business opportunity for financial institutions, not a concession
- Research shows that consumers are willing to pay more for climate-linked financial products if they create measurable or demonstrable impact.
- For example, up to 40% of consumers said they would choose a green savings account with a 20% lower annual percentage yield (APY) than a traditional savings account.
- 25% of consumers said they would take an account with a 60% lower APY. This trend also applies to climate-linked investments that offer specific, actionable products that connect to both an investment thesis and a thesis of societal benefit.
- Research shows that consumers are willing to pay more for climate-linked financial products if they create measurable or demonstrable impact.
- 3. Consumers are eager for advice and support from their financial partners
- Banks are well positioned to fill this gap, as two-thirds of consumers prefer to partner with their bank for financing a solar panel purchase rather than directly with a solar panel installation company.
- Consumers trust banks for their perceived expertise, trustworthiness, existing relationships, and because sustainable decisions are also investment decisions that require financial analysis.
FFCON23 Expert perspectives on Carbon markets: Revolutionizing Finance for a Sustainable Future
- 4. Consumers need to be educated—they may not yet have strong perspectives about which green offerings best suit their needs
- Consumer understanding of climate-linked financial products is low, and financial institutions will need to educate them on the value proposition of their offerings. In a survey, consumer responses to four different value propositions associated with a green savings account were almost evenly split, indicating a lack of understanding. The same phenomenon repeated itself with respect to investment products.
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