Banking on the future

What is sustainable banking? Finbarr Bermingham finds out from Matt Hale, International Environment Executive for Bank of America Merrill Lynch

Sustainability: the capacity to endure. While it's not a new concept, it has taken on new significance in our lives over the last decades. We need to balance the continued advancement of our species with preserving Earth's diversity. In short, we need to ensure that what we do today can be replicated tomorrow. It's an attitude that's become more visible in every area of society, and in both culture and industry. In his role as International Environment Executive for Bank of America Merrill Lynch, Matt Hale is helping to promote sustainability in the banking sector, and has made more progress than most.

Having worked for the bank for seven years, first as their European Treasurer before heading up their climate change initiatives, Matt has seen at first hand how sustainability has become an increasingly important part of the way in which institutions like Bank of America Merrill Lynch operate. "Sustainable banking," he says, "is working with clients to help them grow their businesses in a sustainable way. I'm responsible for coordinating all the work that's linked with environmental change. I am involved in any client projects, across all of the bank's business groups in this region, that impact sustainability. I work with our internal operations groups too, because we need to care about our own environmental footprint, and encourage staff across the bank to think in a more environmentally friendly manner. I'm also involved with international organisations that are trying to advocate progress in the area, so it's a broad range of things!"

Investment opportunity

Matt's modus operandi is educational - a large part of his role is making clients and others at the bank aware of the hazards of environmental change. "There are real risks in the changing climate," he says, "that clients who are planning five, ten, or twenty years ahead need to factor in. They could be physical, such as rising sea levels, or extreme weather patterns impacting crops or transport, or behavioural, such as shifts in consumer tastes or institutional investing patterns as a result of anticipated environmental change."

It's also important to make companies and individuals aware of the very broad range of opportunities this huge global issue is bringing to business. The British government, for instance, has made £1.2 billion in green grants available to help businesses cut their emissions. Profit-making institutions are primarily answerable to their shareholders, so Matt is involved in highlighting areas in which being environmentally responsible can mean an increase in revenue. "The best way to push the theme is not to talk about saving the planet," he explains. "We tell them that being sustainable is great business. It's going to be the biggest investment theme for the next twenty years. $20 trillion (£12.5 trillion) needs to be invested in emigrating to a low carbon economy around the world. It's an investment opportunity for us, and our clients too."

World leaders

His colleagues in the US have just facilitated the world's largest distributed rooftop solar transaction, totalling $2.6 billion of investment. A couple of years ago, the bank was lead manager on the world's largest wind power IPO. Matt also speaks proudly of a project he was recently involved in sub-Saharan Africa: "We recently invested in a company that provides LED lighting for villages in the region. We used sophisticated banking engineering to flow investment into the deal, and therefore into some of the poorest parts of Africa which are in desperate need of development."

The scale and the range of the work in which Matt's team is involved is vast but, like charity, sustainability begins at home. Bank of America Merrill Lynch have internal global targets for reducing carbon emissions, which range from the very basic to the highly technical. "Of course, we encourage staff to turn off lights, to cycle to work and in the US, we provide them with a $3,000 discount if they buy a hybrid vehicle. But a lot of the methods we've used to reduce our carbon footprint have been IT related. We've developed some very advanced energy efficient technology, for example, in our data centres." Operating a green business has huge internal benefits for a firm too. Energy efficiency results in lower bills, but also percolates positively through the organisation. It's been proven to boost staff morale and productivity, as well as giving companies a level of prestige in the recruitment market.

Carbon is a word that crops up a lot in conversation with Matt Hale, from emissions, to footprints, to trading. Carbon trading is a particularly hot topic in banking at the moment. It's a market-based approach used to control emissions and involves the exchange of government-allocated permits that allow a company to emit a specific volume of carbon. So if one business wishes to increase their emissions, they can buy permits from those who require fewer of them, but the total sum of all the permits cannot be exceeded.

Bank of America Merrill Lynch is among the world's top ten carbon trading firms, but Matt highlights the way the market has stalled of late. Carbon prices have dropped significantly, and have been described as "the world's worst performing commodity". Ironically, a downturn in industrial production has hurt the market. Factories are producing less, therefore emitting less carbon. This shift lowers the demand for carbon credits, and their price. Clearly this is helping to temporarily reduce a key driver of global warming, but it is also undermining the development of a what is a very important market if climate change is to be effectively tackled over the coming decades. Matt nods to the state of flux the industry finds itself in, with politicians dragging their heels on how it should move forward. "International climate change negotiations have stumbled," he says, "leaving the market confused. A market mechanism is the only feasible way to put a price on carbon emissions, so the market isn't going to go away, but it's going through a precarious time."

Matt's work will continue regardless. His account of life in sustainable banking is articulate, enthusiastic and exciting. He's an ecowarrior of a new kind, whose way of working will surely have an impact on our shared future.