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Can cloud technology help banking transition to net zero?

Data from IDC shows that transitioning away from legacy systems within banking could prevent 1 billion tons of carbon dioxide in the coming years. A growing consensus from experts is that the green future of the industry lies within cloud computing.

Our financial worries and existential dread about the climate are intrinsically linked, apparently. Oh, good.

It may not be something we consider often, but the energy required to facilitate bank transfers and money management is hugely significant. That’s right, it’s not just the financing of fossil fuels that we need to be concerned with.

The majority of banks operate their own data centres, meaning many tens of thousands of computers, storage devices, cooling systems, and servers. On average, each major institution will require more than 100 megawatts to function at normal capacity, which is enough to power around 80,000 US households at once.

While this sum is concerning, the fin-tech industry largely acknowledges that it must go net zero with its practices in the coming years if we’re to meet decarbonisation targets – excluding cryptocurrency, which is an energy-guzzling beast entirely of its own.

At COP27 in November, this message was carried by big UK players including Santander and HSBC, whose executives discussed the natural progression of banking en route to net zero. Armed with data from market intelligence firm IDC, they stated that cloud computing is the most promising solution.

Microsoft were present at the summit, and talked up the feasibility of shutting down physical hardware and migrating all processes into the cloud for any takers. It estimated that doing so would lower current carbon emissions of data centres by as much as 98%.

Such a standard has already been set by EQ bank in Canada, and an Italian bank called Flowe. Both have opted for cloud tech over hardware, and boast between 95-98% lower carbon emissions than the majority of institutions yet to make the leap.

While there is a clear avenue to reach net zero on offer, transparency remains a key issue within the industry also. Only a handful of companies report the carbon footprint of their processes publicly, and the UN is finally beginning to demand evidence of ecological progress.

US and EU regulators have long proposed mandatory disclosure from listed companies including their Scope 3 emissions – meaning those indirectly influenced by a bank – and several big companies are said to be included.

Vague as the details currently are, the cohort is said to be sizable enough that by 2024 a minimum reduction of 629m metric tons of carbon dioxide is expected. Beyond just banking, data centres in general are set to adopt smarter sustainability practices that will save more than a billion metric tons of emissions.

It’s promising to see Big Tech getting involved in decarbonisation efforts, but carbon neutrality by 2030 is still looking mighty challenging.


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