Is Your Bank Investing Your Money in Fossil Fuels?

We all trust the bank to keep our money safe. And we don't question what they do with our money once we deposit it. Did you know that while your deposited money is sitting quietly in the bank, it might be busy funding oil pipelines and tar sands?

We don't, as individuals, finance fossil fuels, but we invest in the institutions that are doing it. Since the 2015 Paris Agreement, four of the biggest banks in the US have been the worst global contributors to fossil fuels funding. JP Morgan Chase, for instance, has increased its funding to fossil fuels by $200 billion since December 2015. Wells Fargo, Citigroup, and Bank of America come in 2nd, 3rd, and 4th. In the EU, BNP Paribas was the worst performer, and Japan's MUFG ranked the worst in Asia, while Chinese banks continue to finance coal mining and coal power generation.

More and more corporates and brands are now focusing on reducing their carbon footprint to keep emissions below 1.5 degrees. So, with companies and individuals encouraged to help reduce global warming, I wondered how fossil-fuel companies can still do business as usual.

The answer is because they can.

Accenture wrote about purpose-driven banking and highlighted why many institutions continue with business as usual. One reason is that banks believe the "transition to a purpose-driven model will be slow, and believe there are no competitors ready or able to disrupt the banking market with such an approach." However, Accenture also notes that we could be reaching a tipping point. We've recently seen HSBC end funding for new oil and gas projects and celebrities campaigning against UK banks financing new oil, gas, and coalfields. If the transition to electric vehicles successfully reached a tipping point much quicker than anticipated, who’s to say the transition to purpose-driven banks won’t?

So, what can we do?

According to the podcast A Matter of Degrees, the most significant impact we can have on the planet by cutting our emissions is to move our money to a climate-friendly bank.

An example in the UK is Starling, the grown-up challenger bank that is "built to give people a fairer, smarter and more human alternative to the banks of the past" and is changing the way the younger generation pays and transfers money.

Another is Triodos, a bank that invests in renewable energy, sustainable farming, education, and charities, instead of fossil fuels, fast fashion, and weapons and ammunition.

In the US, there are environmentally friendly banks such as Aspiration, an ethical bank that supports sustainable causes; Atmos, which dedicates 100% of deposits towards funding climate-positive infrastructure; and Amalgamated Bank, which is the largest union-owned bank and led by one of a handful of Black female CEOs in finance.

What else can I do?

NerdWallet has a valuable resource for helping you navigate what a purpose-driven bank is. They list the main features (many of which are either B Corporations or fossil-free certified, or both) and provide the pros and cons (which is important as none of them are perfect, and it depends on what you need or expect from a bank).

Then there's your choice of green credit cards.

This Medium article provides five helpful steps to divest from your current bank (especially if you bank with one of the worst offenders), reinforcing the importance of letting your bank know why you're closing your account.

Check where your pension fund manager is investing your money. Changing your pension is one of the most impactful ways to divest from fossil fuels, and most pension companies offer an ESG option.

And in the US, a recent labor department rule will let employers consider ESG factors when choosing and monitoring their 401(k) investments.

As these recommendations suggest, we can all take many simple steps to drastically reduce what we're contributing to banks and fossil fuel companies in our fight against climate change.

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