A few weeks ago, the Advertising Standards Authority, the UK’s advertising watchdog, banned a series of climate-oriented adverts by HSBC for misleading the public.
The watchdog concluded that the adverts failed to disclose material information regarding HSBC’s financing of projects that many experts argue contribute to the climate crisis. This begs the question: why are HSBC – and other UK banks – choosing to advertise around green themes?
If we look at data from Brand Finance’s UK consumer banking survey, which includes the metrics ‘cares about community’ and ‘committed to sustainability’, HSBC ranks 16th and 19th, respectively, out of all UK banking brands surveyed, indicating a perception issue for the brand.
Interestingly, banks that position their offering not necessarily as a traditional bank – such as The Co-operative Bank, Nationwide Building Society and Coventry Building Society – are performing well in the community metric.
Neobanks, on the other hand, which do not have the physical footprint and historic baggage of traditional banks, are over-indexing in the sustainability metric.
Making sense of the numbers
Readers might look at this data and think that it is not a significant issue that a bank scores poorly on green metrics given the nature of the services a bank provides. This contrasts with industries such as automobiles where emissions can be assessed directly by the consumer.
However, if we look at Brand Finance’s brand reputation scores for UK banks among UK consumers, we see that green scores are correlated with overall reputation. Nationwide (7.3/10), Starling (7.2/10), Revolut (7.2/10) and Monzo (7.1/10), which all have strong green scores, lead the market. HSBC languishes in 18th place with an average reputation score of just 6.2 out of 10.
It is, therefore, no surprise that HSBC is attempting to rectify the situation by running advertising campaigns around its green positioning.
Anecdotally, there appears to be a connection between green perceptions and reputation. However, one must pose a more commercially minded question when it comes to green metrics: does a banking brand’s green efforts impact consumer choice and drive business performance?
To answer that question, we can once again look at the Brand Finance research data. Running a regression analysis on what are typically known as ‘brand drivers’ allows us to see which brand attributes are the most important in driving consumer consideration and, by extension, customer acquisition.
We can take the analysis one step further by comparing HSBC’s performance against the importance of each image attribute.
HSBC does not perform well in the community and sustainability metrics. But those metrics are not the most important when driving consumer choice, regardless of whether consumers might insist they care very much about sustainability.
What the data does indicate is that HSBC underperforms for the most important metrics in the eyes of the consumer: ‘good value for money’, ‘easy to deal with’, ‘open and honest’, and ‘excellent websites/apps’. It is HSBC’s underperformance in these areas that is leading to lower consideration and reputation among UK consumers.
This data is a classic example of consumers’ stated good intentions to support causes like sustainability being overtaken by more pragmatic concerns. When push comes to shove, a bank offering better rates, service or products will generally win greater market share.
One may argue that there is often a gap between stated (or derived) importance and actual consumer behaviour. Fortunately, we have actual data supplied by the current account switching service in the UK, which tracked net current account gains over the same period of Brand Finance’s banking research (October–December 2021).
What the current account switching service data showed is that HSBC ranked 20th out of 20 banks with a net account loss of 19,760. Nationwide ranked first over the same period with a net gain of 33,828 accounts.
What about business banking?
According to B2B research conducted by Brand Finance, B2B customers are much more concerned about a banking brand’s credibility in green metrics (commitment to sustainability ranks ninth out of 18 metrics in brand drivers of consideration).
The B2B space perhaps provides more credible ways that a brand can demonstrate its green credentials (funding of green projects or underwriting green bonds, for example) than in the consumer space, which is why we see greater importance placed on green metrics among B2B customers.
What about banks’ profitability?
Finally, the true motivating factor for a bank on whether or not to pursue sustainable practices is surely driven by profits.
If we look at the return on equity (ROE) of UK banks in the 2021 fiscal year as a measure of profitability, the data appears to indicate mixed results when it comes to sustainability perceptions.
For example, HSBC (7.2% ROE) is more profitable than Nationwide (4.6% ROE) despite Nationwide having the best reputation in the market, as well as the highest net account acquisitions. Whereas the likes of Starling (15.7% ROE), Halifax (13.9%) and The Co-operative Bank (13.4%) are highly reputable and highly profitable.
HSBC themselves are unlikely to be too concerned about the volume of accounts switching away from the bank, as the hypothesis here is that these are very low-value customers, with low deposits and uncomplicated banking needs (and so are not a priority for them).
Ultimately, brand-building needs to focus at the intersection of emotional advocacy and rational proof points.
Too little emotional advocacy and the brand is under-leveraging the power of good advertising. Not enough rational proof points and a brand might be viewed as inauthentic by the customer (not to mention other key stakeholders).
What the above analysis does confirm is that banking brands should, first and foremost, focus on being good banks. Only then is there an opportunity to plausibly show their credentials in the green space and differentiate their brand’s products and services from those of their competitors.
Declan Ahern is director, financial service, at consultancy Brand Finance.
