Beyond Banking: why Sustainability Data is becoming Financial Infrastructure

By Matthew Barnard - Executive Director at BBD

The European financial sector is moving beyond traditional banking boundaries entirely. Embedded finance is dissolving the line between financial and non-financial services. Open banking is expanding ecosystems instead of products. Sustainability expectations are reshaping how institutions assess risk, allocate capital and engage customers. And underneath all of it sits something far less visible but increasingly critical: data.

Financial data of course, but also sustainability data, ESG data, operational impact data, supply chain data, carbon data and governance data. Data that needs to move across institutions, platforms, markets and regulatory frameworks with the same reliability and traceability as financial transactions themselves.

Across the highly regulated financial sector, sustainability is steadily shifting from a reporting exercise to an operational capability. The challenge is no longer simply collecting ESG information, but creating the infrastructure, interoperability and transparency needed to make that information usable, trustworthy and actionable at scale.

And that challenge is becoming increasingly urgent. As scrutiny around greenwashing intensifies and ESG frameworks continue to evolve, the differentiator is shifting from sustainability ambition to sustainability credibility.

Sustainability moves from compliance to infrastructure

For years, ESG initiatives often lived at the edges of financial institutions. Sustainability teams operated separately from core technology and operations functions, reporting cycles were periodic, and data was fragmented. But that model is becoming difficult to sustain.

Regulatory frameworks across Europe continue to push sustainability deeper into financial operations, even amid broader recalibration and simplification efforts. Climate risk, governance transparency, supply chain accountability and sustainable finance disclosures are becoming intertwined with how institutions evaluate resilience and long-term value.

At the same time, investor expectations are changing. According to Eurosif, European asset owners now apply ESG considerations to roughly half of their assets under management, while more than 60% say ESG regulation has improved standardisation across the market.

That shift is pushing sustainability further into the operational core of financial institutions. Investors want measurable impact. Customers want transparency. Regulators want auditable evidence. Sustainability can no longer rely on broad commitments or disconnected reporting exercises. And the result of all this is a growing move away from sustainability as branding and toward sustainability as operational truth.

That transition creates a significant technology challenge. Many institutions still operate fragmented ESG ecosystems made up of spreadsheets, disconnected data providers, manual processes, siloed reporting tools and inconsistent methodologies. In practice, the problem is rarely a lack of data and rather the inability to integrate, contextualise, govern and operationalise it effectively.

The ESG data gap

One of the biggest barriers to scalable sustainable finance remains data quality and interoperability.

Financial institutions increasingly depend on vast volumes of ESG information sourced from external providers, portfolio companies, internal operational systems, regulators and third-party platforms. But the data itself is often inconsistent, incomplete, delayed or difficult to verify. Different providers apply different methodologies, metrics change between jurisdictions, reporting standards evolve and organisations measure similar indicators in entirely different ways.

This creates a ripple effect across investment decisions, risk assessments, sustainability-linked products and disclosure obligations. Even within mature financial organisations, ESG information frequently sits across multiple disconnected environments, leaving data engineering teams, compliance functions, investment analysts and sustainability specialists working from slightly different versions of the same underlying information.

That fragmentation introduces operational risk at precisely the moment sustainability data is becoming strategically important.

The challenge is particularly acute in investment and asset management environments, where firms need to combine financial and non-financial data into decision-making models that remain explainable, traceable and regulator-ready. As sustainability becomes embedded into mainstream financial processes, institutions increasingly need platforms capable of integrating ESG data into the broader operational fabric of the business rather than treating it as a standalone reporting layer.

In practice, many institutions are now having to rethink how sustainability data moves through the organisation entirely. In one recent ESG-focused investment platform project, our teams worked with a global investment organisation to help address the growing complexity surrounding sustainability data integration, management and accessibility.

ESG information existed across multiple disconnected environments, making it difficult to establish consistent visibility, support investment decision-making, and maintain confidence in reporting outputs.

The initiative focused on creating a more unified and scalable data ecosystem capable of consolidating sustainability information from multiple sources into a centralised platform. This enabled improved transparency, traceability and accessibility of ESG insights across the organisation, while reducing reliance on fragmented manual processes.

Importantly, the challenge was not simply technical. It reflected a broader industry shift: as sustainability considerations become embedded more deeply into investment and operational processes, financial institutions need digital foundations capable of treating ESG data with the same level of governance, reliability and operational importance as financial data itself.

Embedded finance meets embedded sustainability

Financial services themselves are becoming embedded into broader digital ecosystems. Banking products now surface inside retail platforms, mobility applications, SaaS ecosystems, healthcare platforms and digital marketplaces. Open banking and API-driven ecosystems continue to accelerate this shift across Europe.

Open banking itself increasingly resembles critical infrastructure. In the UK alone, open banking user connections reached 16.5 million in 2025, while API calls climbed to 24 billion, up 27% year-on-year.

That evolution changes the role financial institutions play. Banks are no longer simply product manufacturers. They are moving towards being infrastructure participants inside wider digital ecosystems. And this same principle is beginning to apply to sustainability.

Rather than existing as isolated ESG products or reporting exercises, sustainability considerations are becoming embedded directly into customer journeys, investment workflows, credit decisions and operational systems. A lending decision may incorporate climate exposure data. Investment platforms may surface sustainability preferences directly within portfolio construction. Supply chain financing may depend on verified sustainability metrics from multiple external ecosystems.

This creates a new level of technical complexity. Financial institutions must now build architectures capable of integrating high-volume, high-variability sustainability data into operational systems that were never originally designed for it, while still maintaining governance, security, auditability and performance.

Why interoperability matters more than perfection

One of the most important shifts happening in sustainable finance is the growing recognition that perfect ESG data may never exist.

We see the real differentiator as an institution’s ability to integrate and operationalise imperfect data intelligently. That requires strong data governance, scalable engineering foundations, API-led integration strategies, lineage tracking and flexible architectures capable of adapting as standards evolve.

In many ways, the future of sustainable finance may depend less on who owns the most data, and more on who can create the most trusted and interoperable data ecosystems.

The International Platform on Sustainable Finance continues to identify interoperability between sustainable finance frameworks as a major priority for the future of global financial systems.

For financial institutions, the long-term challenge is building adaptable digital foundations capable of supporting continuous change. We don’t see sustainability as separate from digital transformation. Rather, it is becoming one of the forces driving it.

The next phase of financial innovation

For years, digital transformation in banking focused heavily on customer experience: faster onboarding, better apps, frictionless payments and personalisation. Those priorities still matter, but the next phase of transformation appears increasingly tied to trust, transparency, resilience and operational intelligence.

Institutions that succeed will likely be those capable of connecting sustainability data, financial data, operational systems and ecosystem partners into coherent, adaptable platforms that support both compliance and innovation simultaneously. In that environment, sustainability data stops being a reporting burden and starts becoming strategic infrastructure. The institutions that recognise that shift early may ultimately be the ones best positioned to compete in the next era of financial services.