The bank accounts and investments you choose can have a significant impact on climate change.
Doing the green thing has become a normal part of everyday life for a lot of us. We recycle, we choose Fairtrade products, we avoid plastic where we can. But what about the services we use? More and more of us are turning to renewable energy suppliers, for example, but what about the way we manage our money in the first place?
Banks and building societies aren’t just places to stash your cash – they’re responsible for driving the world’s economy. It follows, then, that they have an enormous impact on exactly what happens to the world, and some have better intentions than others.
How do banks contribute to climate change?
All of the major high street banks have made commitments in some shape or form to sustainable practices, however for several big high street banks actions speak louder than words. HSBC, for example, has pledged to spend $100 billion on sustainable financing and investments by 2025. But in the years following the Paris Agreement it also increased its fossil fuel financing from $17.4 billion in 2016 to more than $21.5 billion in 2017.
Barclays, meanwhile, holds an annual Green Finance Conference and offers a range of green products, such as loans and investments. Yet according to Greenpeace, the bank was Europe’s third biggest private sector bank supporter of companies planning coal power expansion around the world in 2018. It also leads Europe in banking fossil fuels and fossil fuel expansion, and is the top European banker of fracking and coal power
In fact, according to the Rainforest Action Network (RAN), 33 of the world’s biggest banks have funnelled $1.9 trillion into fossil fuels in the past three years alone.
What is green banking?
In a nutshell, green banking is any form of banking from which the planet derives environmental benefits. Some financial institutions have been built exclusively on this ethos, while other conventional banks have ‘gone green’ by directing their core operations towards the betterment of the environment.
Banks such as The Co-operative, Triodos and Ecology Building Society ensure no part of their business funds damaging activities such as fracking or deforestation, instead choosing to invest in environmentally-beneficial projects and ventures, all while offering their customers the range of savings, loans and investment products you’d get in a major high street bank.
While these banks are lesser known, they’re still covered by the Financial Services Compensation Scheme (so up to £85,000 of your money is protected should they, like any other bank, go bust). Furthermore, these banks tend to offer better interest rates than their high street counterparts.
Some big-name banks are also taking action. NatWest, for example, was the first major UK bank to join the Partnership for Carbon Accounting Financials. It's also joined the Science Based Targets initiative, and has made a number of bold sustainability pledges, including eliminating single-use plastics and achieving carbon neutrality.
Making green banking choices is becoming increasingly popular. According to Ethical Consumer, the amount of money paid into these types of financial institutions rose from £2,077 billion to £2,518 billion in 12 months of 2018, while the UK market for socially responsible investing is expected to grow by 173% to reach £48bn by 2027.
With people more frequently choosing these options – and as the climate change narrative continues to get louder – it’s no surprise that even some of the most well-established banks are considering giving themselves a green makeover. For example, the world’s largest public bank, the European Investment Bank (EIB), has agreed to phase out its multibillion-euro financing for fossil fuels within the next two years to become what it calls the world’s first ‘climate bank’.
What are the best green banks?
There’s a variety of green banks on the market, each with their own environmentally-focused action plans and business beliefs – what constitutes the ‘best’ will depend on your own financial requirements and expectations. That said, the major players are:
If you’re interested in green investment, the Ethical Investment Association (EIA) has a comprehensive list of financial advisors around the UK dedicated to the promotion of ethical and socially responsible investment.
Good With Money, meanwhile, uses the registered Good Egg mark to denote a financial service that makes a positive impact not just on customers’ lives, but on society and the environment, too. See the list here, and its wider directory of recommended services, here.
How green is your bank?
Not sure if your existing bank is an environmental ally or an eco-enemy? Take them to task! Get in touch with their customer service department and ask:
- If they have an environmental policy in place, and what it covers (it should be readily available to view).
- Where your money is going. Is it contributing to the purchase of weapons or the tobacco industry, for example? Banks have an obligation to be transparent about this.
- What their carbon footprint is – several banks claim to be carbon neutral now.
- If they offer any specifically ‘green’ products, such as environmentally-focused investment plans or ethical current accounts.
Alternatively, for a quick overview of how your bank is performing, check out the Rainforest Alliance Network’s ‘Banking on Climate Change 2019’ report. This assigns every major European bank a grade from A to F based on their involvement in specific environmental areas, such as coal mining and fracking. Spoiler alert: they could all be doing better!
The bottom line
The way we look after our money is just as important as the way we spend our money when it comes to fighting climate change. Banks have an enormous influence on the planet, and the environment is no exception. Financial institutions need to be held to account when it comes to climate matters, and the best way you can encourage that is by choosing services that have a positive impact on the planet, instead of a negative effect on the climate crisis.
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