One statistic really stands out about the banking sector and climate change — $3.8 trillion.
That is how much finance the world’s largest banks have pumped into fossil fuels since the Paris Agreement climate goals were set in 2015 with investment increasing in every year except one.
How can this still be the case when we collectively agree we have an emergency on our hands?
Many banks joined pledges at the time of the Paris Agreement to bring their businesses in line with the climate plans, but we haven’t seen the action needed or pledges fulfilled.
Now, as Cop26 begins, we’re perilously close to missing those goals. According to the International Energy Agency (IEA), we can have no new oil, gas or coal development if the world is to reach net zero by 2050.
However, the financial sector has not significantly reduced investment in fossil fuel assets and continues to fund new exploration activity.
Beyond fossil fuels, we also know that the climate crisis and biodiversity loss are intrinsically linked.
Yet still, just a couple of weeks ago, the NGO Global Witness reported that banks have put more than $157 billion into deforestation deals since 2016, funding projects that massively undermine the global work being done to preserve biodiversity.
Banks are making pledges to go to net zero before 2050, but very few can back this claim up or follow best practice on how credible targets are set.
Even fewer have made the crucial first step to include the greenhouse gas emissions of their loans and investments in their targets. It’s time we started interrogating banks on their net zero plans because they hold the purse strings.
The solution — finance for change
We know that to save the planet we need a low-carbon transition boosted by innovative technology, as well as huge-scale nature-based projects that can absorb some of our existing emissions. This is doable but also very costly.
The banking sector should, and could, be bankrolling our future. By rerouting finance to align with global climate goals, banks can provide the additional investment needed and also encourage businesses to transition in a way that is more efficient and fairer. The banking sector has so much potential to drive the change we need.
No one should be pretending that net zero is easy. It can’t be ‘business as usual’ and neither is there one ‘magic investment’ that can fix all our problems.
Moreover, it’s essential that the transition to net zero is a just transition, one that doesn’t leave anyone behind, and protects the most vulnerable and creates prosperity for all, both across the world, and here in the UK.
In running a sustainable bank, I know it is possible: our investments in environmental and socially minded projects generate some return while protecting the planet. Projects and organisations whose motivations are carefully considered in the process of loan applications.
And who will often have gone through certifications to attest to their green standards, for example B Corporation, Soil Association or Green Tourism accreditation.
Over to you
So how do we get the other banks to ditch their environmentally damaging investments and start only banking for good?
During Cop26 we will inevitably see the resurgence of an important debate about who the responsibility sits with for tackling the climate emergency. No one contests that governments need to come together immediately to provide leadership and massive investment.
Alongside this, it is businesses, such as banks, that will provide many of the tangible solutions and that need to make the necessary changes set out by governments.
And that is where you — the customer — comes in. As Greta Thunberg said recently: ‘The Cops as they are now will not lead to anything unless there is big, massive pressure from the outside.’
Many businesses are ultimately governed by market forces. When we make lifestyle changes in what we wear, eat and how we travel, we don’t just reduce our own footprint; we affect change in the sectors we interact with. This is the democratic power of money.
We are seeing it in the banking sector too. After all, it is your money they are holding. In recent years there’s been a huge upsurge in interest from consumers switching to more ethical and environmental financial products. This is what has led banks to start moving, albeit slowly so far, in that direction.
At Triodos we recently released research showing that four in 10 UK adults believe that the COP26 summit in Glasgow is inspiring them to want to use their money in a more sustainable way.
Many consumers are already shifting their cash to make a positive change. If more people join the change it will send a clear signal to banks and other financial institutions that they need to do better.
Changing banks is a quick and easy way to reduce your carbon footprint and drive change in the world.
By each of us individually moving our money, we can collectively mobilise the democratic power of finance and reroute global investment away from damaging fossil fuels and deforestation, and into a greener future of climate solutions.
Let this Cop be the turning point for ourselves as well as our governments. The moment when we shifted our money, changed the banking sector, and became better ancestors for future generations.
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