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Banks can have a social purpose to address climate change but they need to step up the fight
Bevis Watts is managing director of Triodos Bank U.K., a sustainable bank
It has been a momentous year for environmental activism, with protest groups Extinction Rebellion and Youth Strike 4 Climate making their voices heard on the global stage and calling for real change to prevent climate catastrophe.
Another often overlooked but powerful form of democracy in placing action against climate change, however, is money.
From choosing a green energy supplier to eating less meat or boycotting products with unnecessary plastic packaging, consumers are increasingly thinking about how they can help alleviate the ills of climate change through their everyday spending habits.
The logical next step is to look at how they save their money and demand transparency about where their bank is lending and investing – but we are not there yet.
Recent research, commissioned by Triodos, found ethical finance is low down in many consumers’ list of priorities. Although Britain’s ethical finance market is now worth 19 billion pounds ($25 billion), only 9 percent of British savers consider it a priority – in sharp contrast to the 67 percent of savers who prioritise increasing recycling and reducing plastics use.
Even as awareness increases, consumer pressure alone will not be enough to tackle climate change. Banks need to step up the fight.
Banking may not be the first industry you think of when considering action to tackle climate change, but the sector plays a key role in shaping how economies and societies operate and therefore has a significant influence on the future of the environment.
First and foremost, it’s the responsibility of banks to keep people’s investments and money safe. As important, however, is for banks to use that money in the long-term interest of their customers, not simply in the short-term interests of shareholders and senior management.
Every financial decision makes impact after all. It is up to banks to determine whether that impact is positive or negative. Some banks may, unbeknown to their customers, invest in or lend extensively to the fossil fuel sector. A report by campaigning group BankTrack showed the world's top banks have poured $1.9 trillion into fossil fuel financing since the Paris Agreement was adopted.
However money can also be used to do good things that help build the society we want to live in – such as supporting social housing, arts venues or renewable energy. Banks can have a social purpose to address climate change and much more.
Little more than a decade on from the financial crisis, there’s been a stark new warning on the impending volatility of the global economy. This time, the phrase “economic meltdown” seems particularly apt, as the governor of the Bank of England Mark Carney last week warned banks that they must face up to the challenge of global warming.
It’s a welcome sign of change, but we must go one step further and better control how banks use money in the first place. We should make this change not solely to protect the financial sector, but because it is essential for our own future prosperity.
We need to work together to take on the existential environmental and social challenges within the Paris Climate targets and the United Nation’s global goals for sustainable development (SDGs). In part, the transition must come from the banks themselves, as well as regulators applying pressure for change.
Earlier this year, a cohort of British politicians became the latest group to throw its support behind the United Nations Environment Programme Finance Initiative (UNEP FI) Principles for Responsible Banking, an ambitious framework to embed sustainability at the heart of banks operations, helping to tackle climate change and promote the SDGs.
Given the magnitude of the environmental and social challenges we face, global initiatives such as this – which has also been endorsed by 49 banks so far – are very important to achieve systemic change. More banks must now commit to adopt the initiative and align around the much greater impact the banking industry could have in leading society to meet its goals for a sustainable, equitable and prosperous future.
As we all learn about the potential of money to shape the future, many more of us – business leaders and consumers alike – will need to make real choices about how we use our money in ways that will make it better.
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