Funding the future
In the face of environmental crises, we need everyone, everywhere, to take action. And although we are making progress in many areas, one area – with potential for massive impact – is often overlooked: our money. We have the chance to fund the future we want to see.
Climate change and biodiversity loss are the twin crises that will shape the 21st century and beyond. As temperatures rise and nature retreats, we have an ever-diminishing window to take decisive action.
Across the world, people are starting to take this decisive action: spending on sustainable products, even when they cost more; advocating and voting for policies that protect the environment, and seeking to work for businesses with clear sustainability goals.
But there’s one area many of us don’t think about − our finances. Our financial decisions have real consequences: when we save at a bank, we endorse that bank’s lending policies; when we invest in companies, we create demand for their shares and lower their cost of equity, making it easier to do business.
Unfortunately, our money is often having a staggeringly negative impact. Take banking, for example – since the Paris Climate Agreement was signed in 2016 – and despite commitments to net zero – the world’s 60 largest banks have lent $5,5 trillion to fossil fuel projects. This contradiction is true in South Africa, too, where most large banks are continuing to fund the expansion of oil and gas. All this fossil fuel lending increases our money’s carbon footprint, driving it up to eight times as high as that from a green bank. And this footprint is significant for businesses too – for the largest companies, emissions financed through their banks could be as high as double the emissions from their operations.
The same is true for our pensions and investments. In a typical fund, up to 5% of your money could be in fossil fuel shares, contributing disproportionately to climate breakdown. And the damage being done affects biodiversity as well: when 150 large financial institutions were rated on their anti-deforestation policies, none scored higher than 50%. With numbers this striking, it’s no surprise that switching one’s pension is the most significant individual climate action one can take.
Often, we hear concern that greener choices will lower financial returns – that we have to choose between planet and profit. But that’s simply not true! For example, in the UK, the greenest bank has consistently paid higher savings rates than high-street banks. And ESG-aligned investments have outperformed or matched the performance of default funds over the last five years.
When we invest sustainably, we can fund the future we want. Nature-based solutions, renewable energy, cleaner rivers, and clearer air. Each of us can play our part.
So what can you do? For starters – find out more. Look at what’s in your pension; find out where your bank is lending and investing. And then agitate for change. Challenge your financial advisor; speak to your employer about the default pension scheme that’s been set up and whether a more sustainable option is available; contact your bank directly. And don’t forget to spread the word. Let’s all seize the opportunity of greener finances to save our planet.
References are available on request.
