Values-based banking: A simple solution to improve sustainability

November 4, 2024

Tracy Brymer is senior vice president of luxury brands/family office at Ampersand

It should come as little surprise to fashion industry players that one of today’s hottest trends has nothing to do with the latest designers or styles or fads. In 2024, sustainability is all the rage.

And for good reason. The industry is responsible for nearly 10 percent of the world’s greenhouse gas emissions annually, more than international aviation and maritime shipping combined. Everyone from the United Nations to regulators to leading brands have taken notice.

Yet despite any number of commitments, approximately two-thirds of fashion businesses are “behind on their own decarbonization schedules.”

As consumers increasingly seek out sustainable fashion, the consequences are not only economic but legal. Greenwashing is a growing problem, as is reporting mandated by the Securities and Exchange Commission’s disclosure rule and the European Union’s Corporate Sustainability Reporting Directive.

Though fast fashion tends to take the most heat, luxury brands are often no better. Some may be even worse, with opaque supply chains, a lack of meaningful commitments and an outsized impact for products that, definitionally, are “wants” not “needs.” More scrutiny is surely on the way.

Fortunately, there’s one overlooked tool at these brands’ disposal that can be immediately implemented, make a real difference and enhance the bottom line: optimizing their cash deposits and aligning them with a brand’s sustainability goals and values.

Luxury brands under fire crave innovation

Luxury brands face distinct challenges when it comes to sustainability.

On the one hand, their consumers increasingly demand it—particularly Gen Z, which Bain predicts will represent 70 percent of luxury spending by 2025. On the other, most consumers don’t want to pay extra for sustainability given the already high cost of these products.

What’s more, despite the fact that the top five luxury brands earned over $250 billion in revenue in 2023, many are struggling this year amid economic and geopolitical uncertainty. This is forcing brands with lofty sale goals to do more with less and sharpen their focus on sorely-needed innovation.

Luxury brands who are already behind on their sustainability journeys—especially smaller and mid-sized companies—may, therefore, continue to flounder even as pressure mounts.

Optimizing cash deposits could be a way for smart players to be on the leading edge and tell the market, “We got here first.”

Values-based banking offers a solution

Luxury brands are taking some important steps toward sustainability, be it via the circular economy or investments in new supplier networks that promote sustainable practices and prioritize minority-run businesses. But this isn’t enough, particularly when it comes to reporting the hard data that must now back up ESG claims.

That’s where one unsung tool can play a critical role: placing cash deposits with banks who are aligned with the brand’s sustainability goals and values.

For instance, many luxury brands—and especially smaller ones within a large conglomerate that may not know exactly where their deposits sit—may be parking their cash holdings at a bank that, say, is notorious for making big loans to oil and gas companies. Moving those deposits to an FDIC-insured bank (perhaps a community or minority-owned institution) that supports clean energy and environmental projects can be an easy way to advance a brand’s sustainability goals.

The best part? Doing so can accelerate their impact, provide tangible metrics and costs nothing. An effective deposit management strategy can even generate better returns to fund important sustainability initiatives.

Depositors and bankers alike understand the value of such an approach: A recent survey found that two-thirds of respondents from financial institutions and financial services firms report that interest in values-based banking has increased in recent years, while the majority of depositors would be willing to give up a portion of their returns to an institution that is aligned with their values.

The solution may not be the be-all and end-all for luxury brands looking to drive sustainability. More will surely need to be done. But as these brands face immense pressure to make a change with fewer resources at their disposal, optimizing their cash deposits is an important, innovative and cost-effective lever to pull.

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Values-based banking: A simple solution to improve sustainability

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