Is Your Money Powering a Sustainable Future?
Alternatives to big banks that fund fossil fuels exist! Learn about the power of banks and how your deposits could fund the energy transition.
By GreenPortfolio Team
April 26, 2024
Did you know your money can be a powerful force for good? When you deposit your hard-earned cash in a bank, the bank uses that deposit to finance other businesses and economic activities. That means your money is not simply sitting idle. Rather, when entrusted to a climate-friendly bank, your deposits have the potential to fuel positive change and contribute to a brighter future.
Financing is key to achieving a low-carbon future
Big banks have a fossil fuel problem. Between 2016 and 2022, banks provided over $5.5 trillion towards fossil fuel-related projects and operations. To put this staggering figure into context, the combined total assets of the top four banks in the US (which happen to also be the top four funders of fossil fuels worldwide) amount to about $10.3 trillion. In other words, over 50% of the capital controlled by the biggest banks in the US is currently bankrolling our continued reliance on nonrenewable, carbon-intensive energy sources.
The imperative for a sustainable future calls for re-evaluating these investment priorities. A recent report by the United Nations Intergovernmental Panel on Climate Change (UN IPCC) underscored a critical gap in funding for climate action. There is an urgent need to ramp up funding for projects that reduce emissions (so-called mitigation measures) and projects that help communities cope with the impacts of climate change (known as adaptation measures).
Imagine the profound impact the trillions of dollars currently financing fossil fuel projects could have if redirected toward renewable energy solutions. As stewards of capital, banks hold immense power in shaping our energy landscape. This means they are also responsible for aligning their financing practices with the imperative of building a more environmentally and socially sustainable economy. By choosing a bank that prioritizes sustainable investments, your money could become a catalyst for positive change.
Navigating the forest of green banking
If you’re feeling overwhelmed by the options for eco-conscious banking, you're not alone. With terms like green bank, B Corp bank, and climate-friendly bank swirling around, it can be confusing to understand what each signifies and which best aligns with your values. Fear not, because we’re here to break down the distinctions between these terms and empower you to choose the bank that reflects your priorities.
Green banks
Let's start with the big picture: green banks. These are typically government-linked or non-profit institutions with a singular mission – to accelerate the clean energy revolution. They don't offer traditional checking or savings accounts but rather act as financial powerhouses, using innovative tools to fund clean energy projects and entice private investors. Green banks play a crucial role in bridging the gap between public funds and clean energy development.
B Corp banks
B Corp banks, on the other hand, are certified Benefit Corporations that meet rigorous social and environmental performance standards. While environmental sustainability is a key focus, B Corp banks also consider factors like fair labor practices and community development. So, if you’re looking for a bank with a broader social conscience, a B Corp could be a great fit.
Climate-friendly banks
For those focused primarily on combating climate change, there are climate-friendly banks (we offer some options here). These banks prioritize actions that directly address climate change. They might offer loans for energy-efficient appliances or electric vehicles or invest in renewable energy sources. One key feature to look for in a climate-friendly bank is a commitment to eliminating funding for fossil fuel projects.
There's significant overlap between these terms, with many banks potentially falling under multiple categories. Understanding your priorities – whether it's broad environmental sustainability, social impact alongside eco-friendliness, or laser-focused climate action – will help you navigate the green finance landscape and choose the bank that best reflects your values.
Now that you understand the landscape of climate-friendly banking, here are 3 easy steps to get started on your green banking journey.
3 things you can do now
Excited to join the movement towards a sustainable future with your finances? Here's a roadmap to get you started:
1. Explore climate-friendly banking options:
The first step is learning more. Exploring your bank's investment practices isn’t always easy, but most banks provide detailed information about their lending priorities and areas of focus in annual reports. Additionally, resources like sustainable banking guides or GreenPortfolio’s platform can help you navigate your options and find a bank whose values align with yours.
To get you started, we've compiled a list of climate-friendly bank options! These banks stand out because they:
- Focus on Sustainability: These banks minimize or eliminate funding for fossil fuel projects, making an effort to invest in a healthier planet.
- Prioritize Transparency: These banks avoid greenwashing. Instead, they demonstrate their commitment to the environment through concrete actions and transparent reporting.
- Champion Clean Energy: These banks actively support clean energy sources like solar, wind, and geothermal and are committed to financing renewable energy projects.
- Offer Green Investment Options: Most of these banks provide opportunities to invest your money in sustainable businesses and initiatives, allowing you to directly contribute to a greener future.
2. Test-drive a climate-friendly bank:
Once you've found a climate-friendly bank that aligns with your values, switching is easier than you might think. Many banks offer transition tools to help move your direct deposits and automatic payments.
And don’t feel pressured to move all your money at once. If you just want to test the green banking waters, consider trying out a checking or savings account at a green bank as a first step. Many offer options with environmental benefits.
3. Send a Message to Your Old Bank (Optional):
Consider letting your previous bank know why you're leaving. A polite message can raise awareness about the importance of sustainable banking:
- Explain your desire for ethical investments that combat climate change.
- Mention your interest in renewable energy opportunities.
Every voice matters! By expressing your priorities, you can encourage banks to consider greener practices.
Join the Movement for a Sustainable Future
Remember, your individual action has power! By choosing a green bank, you're contributing to a larger movement pushing for a cleaner future. Together, we can create positive change. Make the choice today to align your finances with a sustainable tomorrow.
If you want to review the environmental impact of your investment portfolio, get started today on the GreenPortfolio Climate Hub!
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