How to Take Climate Action – Part III: Green Finance & Banking
This blog is part of How to Take Climate Action, a series that unpacks what we can each do to influence the systems around us and reverse climate change. The climate crisis is the defining challenge of our lifetime – and it’s a systems issue. But we’re not powerless to change our trajectory.
Our power comes from the roles we play in our households, at work, as participants in financial markets, and as members of local, national, and global communities.
In this chapter of the Climate Action Playbook, we break down how to take action in financial markets.
Our finances aren’t as green as we think.
How does our money impact the environment? The first thing to come to mind might be how we spend money. Did we buy a cut of beef or local produce? Splurge on fast fashion trends or a sustainable staple? The Joro app helps you take control of the environmental impact of your spending.
But our entire financial system plays a role in climate change, and it starts long before checkout. Who we choose to bank with and what we invest in can support sustainable innovation or fund fossil fuel companies and environmental injustice.
Our power in financial markets comes from two spheres of influence: as customers of financial institutions, and as investors (who we fund and our shareholder influence). This green finance playbook will teach you how to make sure your money is working for your morals.
Part I: Where You Bank & Borrow
It might sound counterintuitive, but your money can contribute to climate change just sitting in your bank account. That’s because it’s not really just sitting there. Your bank is free to lend your money to others however it wants while you’re not using it –and you might not like what they’re investing in.
Major banks are the world’s largest fossil fuel financiers. The 35 leading global investment banks have funneled more than $2.66 trillion (£2.2tn) into the industry since the Paris Climate Agreement was signed in 2016.
Financing fossil fuel drives climate change and exacerbates inequality. Low-income and communities of color are disproportionately exposed to fossil-fuel-related pollution – and are limited in their ability to combat injustice thanks to decades of prejudiced bank lending.
1. Is Your Bank Part of the Problem?
Megabanks are profit-driven institutions with little incentive to act in service of local communities or the planet – but some are dirtier than others. US banks have a particularly troublesome track record: JP Morgan Chase is by far the largest fossil fuel financer in the world. And Wells Fargo, Citi, and Bank of America claim the next top spots.
See how your bank stacks up on the Fossil Fuel Report card, an annual report on fossil fuel financing by international banks. If your bank has a poor track record, the best thing you can do is take your business elsewhere – and be vocal on your way out the door.
Even if you’re not ready to switch banks yet, you can take climate action from within. Use customer portals to advocate for clean investing, call out your bank on social media, and support campaigns pressuring it to divest from fossil fuels.
2. Breaking Up With Your Bank
Ditching your bank can help align your money with your values – but where do you go next? For starters, look for a financial institution that is: focused on clean energy, B-corp certified, and/or BIPOC-owned. Local credit unions have a greater vested interest in your community, making them another great option.
Helpful Tools:Bank for Good and Mighty Deposits can connect you with financial institutions that offer the services you need and are aligned with your values.
Digital Banking: Environmentally-focused online banks are convenient and low-waste. Aspiration offers planet-friendly perks like automated reforestation and cashback for conscious spending.
3. Choose a Socially-Responsible Credit Card
Even if you use a credit union or community bank, you might be linked to a megabank (and fossil fuel financing) through your credit card.
Choose an Affinity Card: These cards are issued in conjunction with a charitable organization and direct a portion of your spending to its cause. Consider one of these environmentally-focused options.
Rewards Points:Can’t switch cards? Most providers allow customers to donate their rewards points to charitable organizations – use yours to fight for environmental justice.
Socially Responsible Institutions: Affinity cards and points donations can help, but your card may still be issued through a mega-bank. These socially-responsible credit cards support community banking instead of oil execs.
Ditch the Worst Offenders: Reduce your impact by cutting up your Chase, Wells Fargo, Citibank, or Bank of America credit card and choosing, well, anyone else.
Compensate for your credit spending: What if you could automatically offset everything you buy with high-impact carbon offsets backed by evidence and analysis? Then, what if you got tailored insights and coaching from Joro to lower your footprint and the price of your offset? Join a select group of people with early access to our new subscription incentivizing low-carbon living.
Part II: Socially-Responsible Investing
Investing is more than a way to grow our personal wealth – it’s a way to fund the future we want to see. There are two ways to bring green finance to investing: funding companies working to solve the climate crisis and using stakeholder influence to push for greener decision-making from within.
1. Sustainable Personal Investing
Global financial markets are rapidly changing. Millennial investors are more than twice as likely to make value-driven investments, and the financial implications of climate change have caused interest in sustainable investing to skyrocket.
Global assets applying environmental, social, and governance (ESG) data have more than tripled since 2012 – with a net value of 40.5 trillion dollars. And they’re not just moral investments: a recent analysis found sustainable funds provide an equal investment return to traditional funds.
Investing with a Financial Advisor
If you work with a professional financial advisor (or plan to in the future) let them know you’re not interested in funding fossil fuels with your investments. Instead, ask them to consider ESG data as they develop your investment strategy.
Run potential investments through Fossil-Free Funds before making the leap. This website ranks individual mutual funds by environmental record and financial performance, so you can feel confident your decisions are wise for the planet and your pocketbook.
Investing Through an App or Online Service
Digital investing tools match you with buying opportunities that suit your goals and values. The popular finance app Acorn offers green portfolio options. Stash’s Clean and Green fund spreads your investment across 30 renewable energy companies. And Betterment allows users to choose from portfolios that meet a number of socially-responsible criteria.
2. Green Your Pension or 401(k)
Saving for your future isn’t always good for the planet’s future. In fact, if you’re not sure where your retirement investments are going, they’re probably not supporting climate-friendly causes.
There’s an estimated $47 trillion invested in pensions worldwide – that’s half of the money in the global financial system! But in 2019, less than 1% of the world’s largest pension funds were invested in low-carbon initiatives. And just 3% of 401(k) plans, which are more common in the private sector, offer ESG funds as an employee investment option.
How to Support Green Finance with your Retirement Investments
Educate: What does your individual pension or 401(k) support? Ask your employer for a rundown or contact your provider for a fact sheet.
Engage: If you’re disappointed by what you learned, chances are your coworkers will be too. Join forces and push your employer to offer cleaner options to everyone in your company.
Swap: If your employer can’t or won’t offer greener pensions company-wide, inquire about switching to an ethical pension within your current provider or opt for a self-directed fund where you select and manage your own assets.
Advocate: One reason ESG funds are rarely offered in pensions and 401(k) plans is because employers are afraid of being sued if they fail – sign this petition to let them know inaction is the greater risk.
3. Flex Your Shareholder Influence
A shareholder is a person who owns a full share (as opposed to a percentage of one) in a company. Shareholders influence company decision-making by voting for board members and on business initiatives.
If you own shareholder stock in a company, use that influence to push for environmentally- and socially-responsible directives. Hold interest in a financial institution? ShareAction coordinates with bank shareholders to file resolutions aimed at phasing out fossil fuel investments.
Claim Your Share
Buying a full share in a major company isn’t realistic for many people (they’re expensive!). But you can still help shareholder power push them in the right direction. Invest in groups like Humankind, which identify powerful companies with the greatest potential returns for humanity and utilize stock ownership power to drive socially-conscious decision-making.
Be a Social “Shareholder”
Even if you don’t hold stock in a company, your voice is a powerful tool. Use social media to raise awareness and apply pressure on key financial institutions. Hop on Twitter and share what you’ve learned to encourage others to switch banks or push for change beside you.
Together is the Only Way
No one can reverse climate change on their own. We need to work together to influence all the systems we’re a part of. Download Joro today to start building your personal climate practice and share what you learn with the people around you. And stay tuned for chapter four of our climate action playbook: how to take climate action in your community.