The COVID-19 pandemic has widened the global wealth gap; and the UK is not exempt. The nation entered the crisis with a chronic savings problem: 1 in 4 had no savings, and 12 million people were unable to pay an unexpected bill of £300. When the pandemic led to loss of income for millions, disproportionately affecting certain industries and people with unstable incomes, this lack of financial resilience was rapidly exposed. People who were already struggling found themselves in greater financial difficulty, and families who had previously been financially stable were forced to visit food banks for the first time.
Additionally we have seen that certain demographics were disproportionately affected, BME people were more likely to have been made unemployed where job cuts were made and 7 in 10 disabled people experienced loss of income, furlough or unemployment.
On the other side of the coin, higher-income families and people in jobs that could be adapted to home-working, found themselves spending less and saving more. The Bank of England reported that higher-income, middle-income and retirees were all more likely to have saved more, whilst people who found themselves unemployed or furloughed were most likely to see their savings depleted.
Both sides of the coin represent opportunities for sustainable finance.
People who have had their financial wellbeing negatively affected by the pandemic are in need of improved financial inclusion, which we define as access to financial products and services they need, at the time when they need them. Amongst other things, the pandemic has highlighted the need for more affordable credit products, financial education, and support in building up savings for the future.
There is also an opportunity to engage people who find themselves with more disposable income. Our recent survey showed that the pandemic has raised awareness of social impact amongst bank customers. 52% customers said that social impact is more important as a result of COVID-19, and 50% of customers say social and environmental impact is now a major factor in choosing a bank.
Impact investing is an opportunity to appeal to customers' increasing desire for social and environmental impact, and an opportunity to engage people, including first-time investors. US data from 2020 shows that more than double the capital has flowed into sustainable investments compared with 2019. In financing the transition towards carbon neutral, moving capital away from non-sustainable investments also delivers social benefits. The poorest in society disproportionately suffer the greatest negative affects of climate change, including extreme weather events that damage homes and businesses, disruption to agriculture, higher pollution levels, and displacement creating climate refugees. Impact investing is therefore an opportunity for more affluent customers to build their own financial resilience, whilst creating value for others in society.
The pandemic has increased the urgency for financial services to focus on sustainable finance solutions, and the increased customer interest creates significant opportunity for innovation.
Take a look at our latest report: Growth through financial inclusion: a roadmap for UK banks, which outlines the complexity of financial inclusion, highlighting the most impacted demographics, key drivers and examines the consequences of the pandemic, as well as the many financial inclusion initiatives that are making a difference.