This is a space where banks are well positioned to serve their customers for instance, two in three consumers would rather partner with their bank on financing a solar panel purchase than work directly with a solar panel installation company. They are inundated with offers-such as rooftop solar systems, electric vehicles, electric heat pumps, insulation upgrades, sustainable investment products, and personal carbon calculators-but they do not have easy access to quality technical and financial advice on how, or whether, to incorporate these offers into their lives. Consumers are eager for advice and support from their financial partnersĬonsumers are often overwhelmed and confused by the transition to more sustainable ways of living. The opportunity would seem to be to create more specific, actionable, climate-linked products that connect to both an investment thesis and a thesis of societal benefit (Exhibit 4).ģ. However, the emerging opportunity is not for derivative ESG offerings. ESG funds have for years charged higher-than-average fees. We saw the same phenomenon with respect to climate-linked investments. This research was carried out in late 2022, when national savings rates had already increased, and these impacts therefore implied relatively meaningful financial trade-offs. A quarter of consumers said they would take an account with a 60 percent lower APY. Up to 40 percent of consumers said they would choose a green savings account with an annual percentage yield (APY) that was 20 percent lower than a traditional savings account. We observed this in the case of a green savings offering, where consumer deposits are ring-fenced for lending activity to sustainable borrowers. However, our research shows that in many instances, consumers are willing to pay more for climate-linked financial products, especially in the context of savings, investing, and personal advice, if those products create measurable or demonstrable impact in exchange-but that can be a big “if.” One side effect of this approach is that concessionary products, because they are less financially accretive, tend not to scale into attractive businesses. Many green financial products are designed and sold as “concessionary” offerings-for example, discounts on borrowing for electric vehicles or enhanced rewards on a credit card. Green offerings are a business opportunity for financial institutions, not a concession Likewise, interested consumers were not limited to the top end of the market-for instance, the balance size of savings accounts was roughly the same among consumers interested in green savings accounts as it was among those who weren’t interested in the accounts (Exhibit 3).Ģ. 1 “Nation’s urban and rural populations shift following 2020 Census,” US Census Bureau, March 10, 2023. For example, 24 percent of these interested customers live in rural areas, which is roughly equal to the share of the total US population living in rural areas, according to the US Census Bureau (Exhibit 2).
The segment of interested consumers went well beyond high-earning city dwellers-in fact, consumer interest is not highly correlated with geography or income. Interested respondents are consumers who report interest in a climate-linked financial product. Advisory services, for example, in such areas as home efficiency improvementįor the purposes of this article, eligible respondents are defined as those with at least one of the following: personal checking account, personal savings account, personal credit card, or personal investment fund.Investment products, such as climate-screened index funds.Lending programs, such as residential-solar lending and electric-vehicle lending.Green credit cards, with rewards points based on shopping behaviors or carbon footprint tracking features.Savings and checking accounts, such as green deposit accounts that use ring-fenced deposits to support green lending.We measured consumer interest in and willingness to pay for five climate-linked financial products or service offerings: The survey garnered responses on consumer appetite for financial products, consumer willingness to pay for financial products, and consumer attitudes toward their financial institutions. We conducted an extensive survey in late 2022 of a representative sample of 3,000 American consumers aged 25 and older to gather their perspectives on consumer financial products with sustainability features, with a specific focus on climate-linked products.
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