Banking on Sustainability: How Financial Institutions Can Lead the Climate Fight

As the world transitions towards a greener economy, banks are uniquely positioned to influence businesses, investments, and individuals toward more sustainable choices. But how can financial services companies move from ambition to impact?

In a recent fireside chat, we sat down with James Streeter, Head of ESG at Tandem, to explore how banks can drive real impact in the fight against climate change. Tandem is building the UK's greener digital bank, helping consumers choose greener lifestyles. With a 2050 net zero target, Tandem has made Scope 1 and 2 reductions and offset 100% of its 2023 operational emissions (i.e. all emissions with the exception of its Scope 3 Category 15 invested emissions) by purchasing high-quality carbon credits.

Want to dive deeper? Read on for key insights or watch the full webinar recording.

Why should financial institutions engage in climate action?

"Fundamentally, it’s about the energy transition – we all have a role to play. Capital must be deployed to accelerate this shift and help through the journey, and at Tandem, we see this as an opportunity." James explained.

Financial institutions can’t shy away from climate action. In a highly regulated sector, climate considerations are now becoming integral to business practices, particularly in risk management. Addressing climate risk is complex and requires a structured, proactive approach to ensure long-term resilience and regulatory compliance.

What contributes to a bank’s carbon footprint?

Tandem serves over 250,000 customers and holds £2.9 billion in deposits, deploying around £500 million annually in "green" or "pathway to green" lending. However, defining what qualifies as "green" is crucial. 

James broke it down into three key areas:

• Scope 1 & Scope 2: when it comes to emissions, Scope 1 and 2 are minimal with emissions in the tens of tonnes, which is typical for financial services companies.

• Scope 3: Scope 3, particularly financed emissions (Category 15), is the major contributor, which is around 230,000 tonnes for Tandem. This includes investments in housing, heat pumps, solar panels, and vehicles.

This highlights why banks must focus beyond their own operations and influence the wider economy to drive decarbonization.

What is Tandem’s climate ambition?

Tandem has committed to net zero by 2050, with interim steps of achieving net zero for Scope 1 and 2 emissions by 2030, primarily by decarbonizing its offices. The bank is also offsetting its operational emissions annually, starting with a 2023 baseline of 3,013 tons, as part of their ongoing net zero journey.

Turning challenges into opportunities

For financial institutions, sustainability isn’t just a "nice-to-have" anymore, it’s a must. James emphasizes: "It's no longer about deploying the money we earn, it's about how we make that money in the first place." This shift in mindset over the last decade has forced companies to rethink their approach, embedding sustainability into every part of their operations.

But it’s not without its hurdles. With a constantly changing regulatory landscape, unpredictable markets, and customers who are more demanding than ever, it can feel like an uphill battle. "You could see it as a burden," says James, highlighting the rising risks and pressures. Yet, amid the chaos, there’s a massive opportunity for those willing to innovate. Instead of viewing disruption as a roadblock, financial institutions can seize it as a chance to lead the charge in building a more sustainable future.

How does regulation impact financial institutions?

Having worked in highly regulated industries like oil and gas, James highlights how financial institutions are now facing similar pressures – from the internal need to assess and manage climate risks to rapidly evolving regulations.

"Banks are highly regulated, and now, sustainability is becoming part of that framework”. James explains. Starting with Task Force on Climate-related Financial Disclosures (TCFD) reporting and, more recently, the Financial Conduct Authority (FCA)’s anti-greenwashing rules, financial institutions must take a proactive, not reactive approach to sustainability. Over the past year, they have been required to prove the credibility of their sustainability claims, demonstrating how swiftly new regulations can shape the industry.

From compliance to leadership: How financial institutions can drive sustainability

Sustainability isn’t just about compliance – it’s about adapting to shifting government policies and future-proofing the business. “Every time a government gets elected, they shift the goalposts. The financial services sector must stay agile to anticipate and respond to these changes.”

At its core, sustainability relies on collecting data and utilizing it to drive meaningful change.  “It’s a cliche but what gets measured gets managed,” James reflected. With growing pressure for transparency and accountability, businesses must back up their sustainability claims with real, actionable data. “As financial institutions deepen their focus on carbon accounting and Scope 3 emissions, the real opportunity lies in leading the transition, leveraging their influence and leadership to drive meaningful change across the value chain.”

How do banks engage customers in sustainable finance?

"Trust is fundamental," James emphasized. "Customers want to know they’re banking with an institution that aligns with their values. For example, we ensure transparency by benchmarking our products against the EU Green Taxonomy to prevent greenwashing. To take it a step further, we created "Pathway to Green" to integrate green into our taxonomy, ensuring that each initiative meets above-average standards. It’s a clear progression, built on a solid foundation.”

How can sustainability leaders get internal buy-In?

Driving meaningful climate action requires getting the entire organization on board. James Streeter shared his approach:

• Understand your stakeholders – "Decisions are rarely made solely on sustainability. Align your efforts with what matters to them, whether it's risk, brand value, or financial opportunity."
• Make the business case – “Sustainability goes beyond compliance and ethics, it also drives growth. It can open new market opportunities, reduce risk, and strengthen customer trust.”
• Embed sustainability into decision-making – “Every decision you influence adds up. Instead of expecting a company-wide shift overnight, embed sustainability in different aspects of the business gradually.”
• Leverage data and transparency – “Measurement drives action. When you present the numbers, especially to financial institutions, they start engaging with the challenge.”
• Lead with positivity and resilience – “You’ll face challenges, but stay focused on the long-term. Sustainability is about persistence, collaboration, and maintaining momentum.”

Tandem’s Climate Journey with Climate Impact Partners

Choosing the right project was about finding one that truly aligned with Tandem’s business.

What keeps you motivated?

For James, it’s personal: "I credit my passion for sustainability to my mother. She taught me to respect nature, and that has stayed with me throughout my career. Sustainability is about resilience, seeing opportunity in disruption, and being part of the long game."

His advice to other sustainability professionals? "Stay positive. Engage with the business. Every decision you influence adds up to something bigger."