Bill Fenick, Vice President, Enterprise Verticals
November 10, 2021
The pressure is on. Financial Services leaders and investors are encountering the perfect storm of environmental, social and corporate governance (ESG) standards, and the rising public focus on sustainable awareness.
Sustainability has become a compelling event for the industry. Investors and activists are putting firms under even more scrutiny when it comes to funding heavy-emitting companies. The explosion of global data growth has contributed greatly to the surge in computing power, sparked in large part by products and services leveraging automated intelligence (AI) and machine learning (ML) capabilities. As a result, stringent ESG industry regulations are in place to help offset carbon emissions, save energy and conserve natural resources.
Financial Services chief executives and board members must take action now to confront ESG requirements head-on if they haven’t already. Data-centric IT infrastructure and ESG-compliant, eco-friendly data center planning should be core components of their overall company’s eco-friendly commitment and business strategy moving forward.
In doing so, financial services top level executives and decision-makers are already seeing the benefits of prioritizing sustainability, driven by:
- Feedback from shareholders and clients concerning ESG strategies
- Customer expectations and preferences regarding eco-friendly practices
- Robust regulation at all levels of governments, especially focused on decarbonization
- Business pressure to remain relevant and innovative in a competitive market
- Brand positioning and differentiation within the industry
The ROI of sustainability extends to more than just humanity and goodwill — it has tangible monetary returns, as well. According to research from Forrester Analytics, enterprises that emphasize sustainability experience a healthier bottom line, bolstered by improved customer satisfaction and higher employee retention.
Research also indicates that financial services firms that embrace sustainable business models have an opportunity to win over values-based customers. This is significant at a time when consumers of all ages are more keenly aware and focused on corporate social responsibility efforts. As a result, customers are more likely to choose companies that help local communities, treat employees well, or are reducing their environmental impact.
For financial services organizations looking to elevate their brand, industry differentiation and shareholder stock price through a sustainability-first business operations approach, it goes beyond bold claims of a commitment to sustainability. The implementation of a global data-centric hybrid IT infrastructure enabled by a deep focus on renewable energy, energy efficiency and supply chain sustainability initiatives are required.
They will need data center partners with a fit-for-purpose global platform that provides the infrastructure, technology, and resources to meet changing business demands and the flexibility to adapt to evolving sustainability goals and requirements.
Here’s how the right data-centric hybrid IT infrastructure can support the sustainability efforts and goals of financial services firms and key IT architecture considerations.
For financial services organizations, the notion of sustainability was historically associated with sustainable investment, a trend which has its roots in the philanthropic and socially conscious decades of the 1970s and 1980s.
Since then, the pressure on financial services firms to make investments based on ESG considerations has increased significantly at local, regional and international levels. This further extends to the operational behaviors of financial firms.
The European Union (EU) has developed an entire taxonomy for sustainable projects and activities, and there are currently more than 200 environmental laws for financial services around the world.
Financial services firms need to adopt a comprehensive, multipronged approach to sustainability that accounts for the full range of operations, processes and products — including the implementation of a data-centric hybrid IT infrastructure foundation capable of supporting current and future legislative demands.
Growth & Competition
It’s estimated that as companies rearrange their operations and recover from the impact of COVID-19, the financial services market will grow to $28.5 trillion by 2025 at a 6% annual compounded rate.
Between a quarter and a third of consumers factor values into their choice of financial services providers. Nearly 70% of highly informed and empowered consumers plan to step up their efforts to proactively and consciously identify brands that are working to reduce environmental impact, with 61% seeking out energy-efficient labels when making purchases. Financial services firms that can demonstrate they not only share those same social and environmental values, but actually act upon them, will be clear winners in the race to attract new clients and retain the loyalty of existing values-based customers.
For financial services organizations emphasizing energy efficiency and a smaller carbon footprint, it’s important to work with providers that have a solid sustainability strategy and can offer cost-effective green data centers options.
Digital Realty’s portfolio of data centers is designed to deliver industry-leading PUE (power usage effectiveness) while requiring fewer construction materials. We utilize renewable energy sources and tap into reclaimed water supplies where available to minimize the use of potable water. Our data centers also possess an array of high-efficiency hardware, cooling technologies, and software-defined operations to maximize efficiency while reducing their environmental impact.
These initiatives are shown to deliver increased asset value and lower operating costs.
Exponential Data Growth
With hundreds of millions of financial transactions occurring in the financial world each day, the financial services industry already creates, consumes, and operationalizes almost incalculable volumes of data.
According to the Data Gravity Index™, banking and financial services firms across G2000 Enterprises are expected to increase their data gravity intensity by a projected compound annual growth rate (CAGR) of 146% through 2024. That ranks first among the seven distinct G2000 industries featured in the index.
The inability to recognize and manage the exponential increase in data volumes, the data-centric infrastructure barriers and implications for secure data exchange will have very real consequences for financial services firms in terms of energy consumption, inflating costs and slashing margins – all with the potential and likelihood to occur simultaneously.
Cyber & Data Security Risks
Dealing with ever-growing volumes of data also exposes financial services institutions to an increased risk of data loss or data corruption as a result of persistent cybercrime or power outages.
According to the Boston Consulting Group (BCG), financial services firms are 300 times more likely to be targeted by a cyber-attack than businesses in other industry segments.
To minimize incidents of downtime and the associated vulnerability of data and cyber threats, financial services firms need a global business platform that operates ubiquitously, and on-demand, augmented by real-time intelligence to best serve customers, partners and employees via digitally-enabled interactions across all points of business presence. To enable this business platform requires a data-centric infrastructure architecture designed to defy data gravity, secure data near the customer, enforce data compliance, and is engineered for engineered for artificial intelligence (AI).
Global Impact of Digital Realty’s ESG Strategies
Over 15+ years, Digital Realty has assembled the largest global platform of multi-tenant datacenter capacity7, while operating the second largest carrier neutral interconnection platform in the world.8 We serve more than 5,000+ of the largest and most innovative companies globally.9
We’re already helping our customers operate highly efficient, hybrid IT infrastructures supported by data-driven sustainability strategies that reduce carbon footprints and drive essential business functions at a fraction of the normal cost.
Our comprehensive approach to sustainability includes negotiating renewable energy agreements with utilities nation-and worldwide and using underground aquifers to slash cooling system energy consumption by 20%.
During 2020 and in January 2021, we issued €3.1 billion in green bonds at very attractive rates, bringing to $5.6 billion our total issue since 2015.
In 2020, we committed to reducing our Scope 1 and 2 emissions (direct and indirect) by 68% in more than 290 of the data centers we operate and manage across 24 countries. This is in line with a 1.5-degree climate change scenario confirmed by the Science-Based Target Initiative for reduced carbon emissions by 2030.
Learn more about our environment and sustainability strategies.
Download the Digital Realty 2020 Environmental, Social and Governance Report.
7 451 Research, Market Forecast, Leased Datacenter Global Providers, 2020. Capacity measured in terms of operational square footage
8 Synergy Research Group; Second largest carrier neutral interconnection global
9 Digital Realty Trust, Inc. (2021). Form 10-K 2020