February 13, 2009

Specific metrics and trackable benefits get to the heart of the problem. In a down economy, the successful execution of sustainability initiatives may require that banks develop new measurement capabilities and valuation techniques.

Banks that are constrained by their bottom lines may only be able to fund the projects with predicted short-term paybacks, such as:

  • Simple reductions in cost. Newer hardware and systems management techniques such as server virtualization allow data centers to process the same volume of work with fewer physical machines, thus lowering the electric bill.
  • Trade-offs among cost categories. Many banks are encouraging customers to adopt online banking in the name of "green-ness." The banks save far more on postage, paper and printing than they spend on the supporting technology.
Candidly, if the bottom line is the sole measure of return and hurdle for investment, banks' supposedly green motivations become suspect. Genuine sustainability initiatives may require different assumptions in order to "measure up"; managers must assign some real worth to the environmental benefits, whether far in the future or elsewhere in the value chain. Similarly, sustainability initiatives often require longer horizons for calculation of returns; energy-efficient building construction, for example, may require higher investment at start-up for a stream of returns extending many years.

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Theresa McLaughlin, Citizens Group EVP and Chief Marketing Officer, Citizens Bank
Rodney Nelsestuen, Research Director, Financial Strategies and IT Investment, TowerGroup
Geoff Greenwade, President and CEO, Green Bank
Patricia M. McGinnis, Research Director, Corporate Banking, IDC Financial Insights