Consumer Duty sets more rigorous and transparent standards for consumer protection in financial services. Under this duty, financial institutions are required to ensure that customers receive clear communication and that financial products and services meet their needs.
We welcome this type of legislation as it safeguards consumers and leads to improved product and service quality. Most importantly, it requires firms to provide consistent and clear information to customers, enabling them to identify products that align with their needs and make effective comparisons about product sustainability. We're hopeful that this new duty, alongside the FCA’s ‘anti-greenwashing’ rule, will help combat the issue of greenwashing.
Consumer Duty plays an important role in shaping banks’ ESG strategies. Here’s how:
Consumer Duty states firms need to prioritise customer needs
Cogo research shows that customers are increasingly prioritising sustainability—62% want their bank to help them reduce their environmental impact. So banks need to align their business strategy with consumer preferences for sustainability and offer green products and services.
The duty emphasises the need for more tailored solutions
In the context of ESG, it is crucial that green products and services are well-targeted to meet the specific needs of customers. Banks can integrate carbon tracking solutions into their banking apps to gain insights about customers' sustainable behaviour and offer personalised solutions.
The law states support needs to be accessible
In addition to customisation, accessibility is another key aspect that companies need to consider under the new duty. Banks should strive to make sustainable solutions accessible to a wide range of customers by offering multiple distribution channels, providing user-friendly interfaces and instructions and ensuring affordability.
Firms should focus on educating customers
Firms can also enhance accessibility by offering educational resources and support to help customers understand the benefits of their green offerings. This could include providing clear information about the environmental impact of products, offering guidance on sustainable practices, and assisting customers in measuring and reducing their own environmental footprint.
Consumer Duty requires transparency
Consumer Duty requires financial institutions to ensure that customers have access to the information they need to make informed decisions. This includes information on the environmental impact of financial products and services.
Under the new duty, banks need to consider the potential financial implications of non-financial factors on their customers.
For example, when a customer applies for a mortgage, banks will need to provide information about the expenses associated with living in the new property. A larger home or a home with poor energy efficiency could lead to significantly higher expenses and financial stress for customers.
If banks neglect to consider and address well-known risks during customer consultations, it indicates a failure to fulfil their duty of care and comply with consumer duty.
Therefore, banks need data and insights to help customers better understand these factors and provide actionable recommendations. Carbon tracking can play a critical role in this process, benefiting both banks and customers.
Furthermore, with 24% of banking customers stating they are likely to switch if their bank does not have an ESG strategy, banks are at risk of losing customers if they do not implement initiatives like carbon tracking.
Book a demo to understand how Cogo’s Personal and Business Carbon Manager products can help your bank comply with the new Consumer Duty rules, as well as increase engagement and customer satisfaction.