Sustainability forces the financial sector toward technology: adapt and mitigate

The banking, financial services, and insurance (BFSI) industry must simultaneously adapt to and mitigate the climate and broader sustainability emergency. With a mandate to address the long-term beyond most other sectors, BFSI has an economic and societal responsibility. In the absence of regulation that meets the emergency, financial institutions must take the lead in helping their clients and ecosystems transition—going far beyond their internal footprints. This report examines how emerging technologies—including artificial intelligence, the Internet of Things (IoT), blockchain, and advanced data analytics—will be critical to achieving new positive outcomes for the environment, society, and BFSI organizations.

Our insurance and banking frameworks at HFS also stress the need to work with communities and governments to address connected sustainability risks as the industry near- and long-term north stars.

There is a stark need for new product innovation aligned with sustainability in BFSI. Another recent paper explores this and much more in insurance. For instance, insurance carriers must revisit their product portfolios and rethink entire underwriting processes and product development to have any shot at interlinking the global sustainability context. An Allianz board member even went as far as to say recently that the climate crisis is on track to destroy capitalism.

Data and the emerging digital technology suite are major opportunities for sustainable finance and insurance

BFSI institutions influence all 17 UN Sustainable Development Goals (SDGs) across environmental, social, and economic dimensions—and such goals are top of mind in a convoluted world for executives (see Exhibit 1). To harness emerging technology effectively, firms must first identify their most material spheres of influence, both positive and negative, and clearly connect them to their organizational and sustainability goals (see Exhibit 2 and our outline).

Exhibit 1: Sustainability interlinks the whole global context: Every macro-environmental factor falls under ESG, with climate, DEI, and security still very much on the minds of BFSI execs

Source: 117 BFSI executives from our broader 600+ Pulse survey, H2 2024

Financial firms are greening operations—but their biggest impact is through clients and ecosystems

Some examples of internal BFSI sustainability include:

• Cloud computing and data centers: Firms are shifting to cloud-based infrastructure with increasingly lower carbon footprints.
• Paperless digital-first services: Digital banking, e-signatures, and electronic documentation reduce paper consumption and enhance operational efficiency.
• Optimized energy management: AI and broader analytics help optimize energy consumption in corporate offices.

Many BFSI firms remain committed to achieving net-zero greenhouse gas emissions in their operations and portfolios despite exiting sustainability coalitions and changing their public-facing narratives.

But, as BFSI firms take steps to reduce their carbon footprints, their greatest potential impact will come from influencing the businesses and communities they serve.

Exhibit 2: BFSI must focus on its most material spheres of influence—customers, partners, and systems change—to maximize its positive impact on sustainability

Source: HFS Research, 2025

Emerging technology can help financial firms drive climate adaptation

Advances in AI, quantum computing, and big data analytics will be essential for understanding climate risks and translating scientific insights into actionable financial decisions, products, and services (see Exhibit 3).

• AI and data analytics: AI is helping BFSI assess climate risks, analyze large datasets, and predict environmental impacts on assets, industries, and supply chains. Financial institutions adjust lending criteria to reflect climate risks, influencing real estate pricing, insurance premiums, and investment strategies.
• Geospatial, satellite, and IoT data: Insurers can utilize satellite imagery to assess climate risks such as floods, wildfires, and hurricanes.

RSA Insurance’s advanced metrics database uses this data, combined with analytics, to support risk consultancy, pricing, underwriting, and customer-facing teams.

• ‘RegTech’ for sustainability compliance: AI, analytics, and automation-driven technology can streamline compliance processes alongside evolving ESG regulations, improving efficiencies and reducing financial and reputational risks—as well as creating data and baselining richness to find new material spheres of impact and value as we cover here.

Exhibit 3: Financial firms can leverage technology to build more resilient operations

Source: 75 BFSI executives from our broader 600+ Pulse survey, H2 2024

BFSI and technology in combination will be central to supporting the transition to sustainability

BFSI institutions must not only build and execute their own sustainability transition plans but also support clients and partners in doing the same (see again our call here). Emerging technology is enabling financial firms to reward positive behavioral change, finance sustainable initiatives, and analyze the trajectories and roadmaps needed to meet sustainability:

• Blockchain and carbon credit trading: Transparent, automated carbon credit trading and supply-chain tracking can ensure accountability. The tokenization of carbon credits enables trading and tracking emissions reductions (although credits remain controversial as a potential means of greenwashing rather than directly reducing emissions).
• Fintech, green bonds, and climate financing: Sustainable investing apps are empowering retail investors to build sustainable portfolios. Decentralized finance (DeFi) platforms are funding renewable energy projects and facilitating peer-to-peer climate impact investments.
• AI for ESG scoring: AI increasingly evaluates corporate sustainability performance, helping investors make informed data-driven decisions and driving capital toward responsible businesses.

BFSI must find a new level of leadership for the systems change sustainability requires

The JPMorgan Climate Compass was an early example that fell short of becoming a loud example of the systemic change we need. JPM, and the whole BFSI sector, still has the chance to be bold. Although politics appears likely to keep it quiet for now, sustainability is left hoping financial firms follow through on their promises to remain committed to embedding sustainability goals into their long- and short-term planning.

The Climate Compass broke down the JPM trillion+ asset portfolio into key sectors and sources of emissions (such as energy or mining). The intent was to collaborate with key firms with systemic influence over industries to transition.

Many other BFSI firms have internal processes similar to those of JPM for engaging with clients, which is central to the long-term sustainability of their investments. However, few influential financial firms and institutions have yet to define an acceptable transition plan or actions.

Fourteen major financial organizations, including Goldman Sachs and Morgan Stanley, pledged support for tripling global nuclear energy capacity by 2050, along with industrial and digital companies.

Barclays, another of the 14, also operates a £500 million Sustainable Impact Capital portfolio to invest in early-stage technology companies focused on environmental innovation.

Commonwealth Bank of Australia (CBA) collaborated with the World Bank to issue ‘bond-i,’ the first global public bond created and managed using blockchain technology, streamlining the processes, reducing costs, enhancing transparency, and promoting sustainable financial practices.

BBVA has increased its sustainable finance target to €700 billion over the next five years, establishing a global finance unit focused on clean technologies and innovation.

The Bottom Line: The financial sector must choose between reacting to sustainability challenges in a fragmented manner or proactively embedding sustainability into core business strategies and operations.

By embracing technology, aligning with global sustainability goals, and collaborating with their clients and broader ecosystems, financial organizations across BFSI can ensure their long-term viability and play a central role in protecting and empowering the environment, societies, and economies.