By: Walter Heck, CTO of HeleCloud
The tech industry is on track to reach $5 trillion by the end of 2021. That would indicate a 4.2% growth trend, signifying a steady return to the sector’s pre-pandemic numbers. In addition, Greenpeace estimates that by 2025, the technology sector could consume 20% of the world’s total electricity; this increase from 7% currently is attributed to the expansion of cloud computing and the further development of new technologies, such as Data Science (DS), which require a great deal of computing power.
As cloud migration numbers continue to soar, corporate environmental initiatives are also gaining traction; and the financial services industry is no exception. Financial firms are contending with a seemingly unmanageable volume, variety, and velocity of data. Thus, cloud solutions are seen as critical for preserving, monitoring, and analysing this data, to remain compliant, with sustainability now at the core of company infrastructure. To best position themselves to deliver on new ESG commitments, such as carbon reduction and responsible innovation, many firms are adopting a sustainable “Green Cloud”. In the past, the financial industry has driven financial, security, and agility benefits through the cloud, but sustainability is now crucial for business continuity, growth and profitability.
ESG becomes an innovation opportunity for financial institutions
Financial leaders should expect regulators, oversight authorities and policymakers to be relentless regarding the need for greater adoption of Environmental, Social, and Governance (ESG) initiatives. ESG refers to a set of standards for organisations that socially conscious investors use to screen their investments. The increased transparency that technology has brought makes it possible for stakeholders to pressure organisations to address their needs and for investors to evaluate companies on their ESG performance. And Cloud infrastructure has become central in enabling the firms to meet their ESG goals.
Executives should think of ESG standards as engineering parameters. Environmental sustainability is the best example: Each piece of code that engineers develop will have a carbon impact each time it is executed. Cloud engineers can optimise coding for speed and scalability, as well as improve it to reduce their organisation’s carbon footprint. The cloud provides tools that can help with this.
But why is ESG so important for financial services? It’s simple – Investors always want to ensure they can continue to earn a return on their investment. Recent data suggests that ESG-related funds outperformed the markets over the first quarter of the year. At the same time, financial services firms are starting to feel pressure from their customers and the public at large. Customers want a firm that reflects their views and beliefs, with many younger investors claiming they are choosing their financial institutions based on their ESG credentials.
The harsh reality is that many players within the financial services sector are already taking advantage of a company-wide sustainability strategy. Those who continue to neglect it, face increased regulatory and public scrutiny, and will also impair their business growth. The bottom line is that financial services can no longer afford to ignore ESG.
The Carbon Reduction Opportunity of Moving to Cloud
Moving to the cloud means going green in more ways than one, with savings of up to a billion dollars, as well as by significantly reducing carbon emissions. When financial institutions migrate to the Cloud from on-premises infrastructure, they reduce carbon emissions by 88% because our data centres can offer environmental economies of scale. Organisations tend to use 77% fewer servers, 84% less power, and tap into a 28% cleaner mix of solar and wind power in the Cloud versus their own data centres. A recent study conducted by the Carbon Disclosure Project found that by the end of 2020, large UK companies that use cloud computing could achieve annual energy savings of £1.2 billion and carbon reductions equivalent to the annual emissions of over 4 million passenger vehicles. Climate change and its effects direct more attention to resource efficiency as a key part of sustainability responsibility, which is of growing importance in the wider financial world.
Cloud data centres optimise the physical environment to cut the amount of energy spent to cool the environment, however, the main factor in the reduction of CO2 emissions has been the aggregation of discrete enterprise data centres to larger-scale facilities that can more efficiently manage:
- Power capacity.
- Optimize cooling.
- leverage the most power-efficient servers.
- Increase server utilisation rates.
The goal of an efficient data centre is to have more energy spent on running the IT equipment than cooling the environment where the equipment resides. In fact, a recent IDC report revealed that if all operating data centres were designed for sustainability by 2024, having adopted cloud solutions to enable smarter data centres, then 1.6 billion metric tons could be saved.
As a concept ‘Green cloud’ is nothing new. However, many customers, regulators, and investors are now aware of the great impact hyper-scale computing can have on CO2 emissions. In fact, ‘Green cloud’ is becoming a major factor in buying decisions.
The Benefits of Going “Green” for Cloud
As finance leaders look to the future, the only safe and sustainable way to ensure minimal environmental impact alongside the development of cloud computing is to vocalise and establish ESG requirements. In the end, cloud computing is more energy-efficient than any other alternative and facilitates environmentally beneficial solutions and economic growth.
It’s simple – the more efficient cloud usage is the fewer businesses will spend. By reducing unnecessary dependencies that consume extra storage or computer resources, FSI business leaders can optimise automation and coding to cut process time and increase efficiency. This helps reduce costs, reduce energy usage and make CTOs’ Iives easier so that they can focus on delivering value.
Moreover, it is estimated that around 70% of employees said they were more likely to work at a company with a strong environmental agenda, and more likely to stay there long term. Over the last decade, many employees in the tech sector have been fighting for greater action from their companies on climate change. Thousands of companies showed their support for the 2019 Global Climate Strikes and almost one-fifth of Fortune 500 companies had committed to the Paris Climate Agreement emissions reductions targets in 2018.
All industries are in a moment of reckoning when it comes to sustainability. When confronted with this challenge, financial organisations should aim to shift to the cloud to satisfy customers, regulatory standards and capitalise on the sustainability benefits of cloud solutions. They must act now, or risk being left behind.