Is your bank account funding the climate crisis?

You’ve seen the headlines this year. Record temperatures, devastating wildfires and extreme weather events have once again put climate change firmly in the spotlight.

You might start looking at your lifestyle choices or investment portfolio. But when was the last time somebody suggested looking at your bank account?

You probably know how your pension or ISA is invested. But are you aware what your bank does with the money sitting in your current account or savings account?

Research suggests that 57% of UK investors already hold ESG or ethical investments, while more than 80% of consumers want their money to do good as well as generate a financial return. Your choice of bank is one of the simplest ways to taking steps to achieve this.

Your bank uses your money

Banks don’t simply store your deposits.

They use them to support lending and financing activities across the economy. Those decisions influence which businesses and industries receive capital, and which do not.

Some banks have made significant commitments to supporting the transition to a lower-carbon economy. Others continue to provide substantial financing to fossil fuel companies and projects around the world. Some do a bit of both but may only publicise one.

According to Bank.Green, in the 10 years since the Paris Agreement was signed the world’s largest private-sector banks have provided $7,900,000,000,000 (that’s $7.9 trillion) of financing to the fossil fuel industry.

For environmentally conscious consumers, that raises an important question:

Is the money in your bank account supporting activities you wouldn’t choose to fund directly?

Interest in responsible investing has grown significantly in recent years. However, there’s still a gap between what people say they want and the choices they make.

Research suggests that while 77% of UK adults would consider responsible investing, only 7% have actively selected an ESG or socially responsible investment.

Whilst people spend time researching ethical investments, we rarely find that they have considered their bank. It’s easy for your current account or savings account to fade into the background of your day-to-day life.

This is often because the information is difficult to find – in fact, you may not have realised that banks use your deposits in this way at all.

The information is available

Bank.Green is an independent not for profit organisation that aims to make banks’ climate records easier to understand. It assesses banks using factors such as fossil fuel financing, climate policies, transparency and support for renewable energy.

Once you have the information you can compare banks and assess whether your bank is aligned to your values.

“The Paris Agreement set the goal to stay under 1.5°C of warming for very good reasons…. our world will become unrecognizable as ocean dead zones, floods, and extreme weather fuel social and economic disruption.” (Bank.Green)

Does switching banks matter?

Changing banks won’t solve climate change on its own. However, removing its funding by using an alternative bank will help.

Banks care about the number of customers they have and how much is saved with them. When more customers ask questions about climate policies and financing activities it tells them that this is becoming more important.

Voting with your feet by switching to a new bank is the clearest signal you can send, and the quickest way to ensure you don’t finance something you don’t want it to. And the Current Account Switching Service in the UK makes it simple to do so.

If you’ve never looked into your bank’s climate impact, spend a few minutes researching it.

Visit Bank.Green and see how your bank compares. One popular high street bank has been described as “#1 in Europe for fossil fuel financing” – where does yours rank?

You may find that your bank’s approach aligns with your values, or instead you may discover things you weren’t aware of. You can research other banks too to consider alternatives.

Either way, once you have the information you are in a better place to make an informed decision.

We often focus on how we spend and invest our money. But where we keep it deserves some thought too. Spending five minutes researching your bank could tell you far more about the impact of your money than you ever expected.

Sources: ESG investing statistics: key UK trends and insights | Unbiased, UK ESG Investment Market Size, Share and Report, 2033, ESG investing statistics