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September 10, 2021

A Greener Agenda: Should You Break Up with Your Bank?

Here’s how you can make ethical banking work for you!

In our three-part Greener Agenda series, Angela Stevens, co-founder of financial literacy organisation Vida, explains how we can all make a difference to the environment with mindful money choices. For this second entry in the series, she tells us how who we bank with can impact the environment and explains how to make the move to a more eco-friendly bank.

But first, some background:

With our laser focus on COVID-19’s cousin – the Delta variant – we may have overlooked the release of the Intergovernmental Panel on Climate Change’s (IPCC’s) report on the climate crisis. The report is a sobering assessment of our planet’s future: the climate crisis is upon us… and, according to UN Secretary-General António Guterres, it’s a ‘code-red for humanity’.

For us in Melbourne, the clamour for climate action has escalated since early 2020 following the catastrophic impact of Australia’s summer bushfires. Mounting fear of the climate crisis has dominated the concerns of over eight in ten Australians and confidence in our political leaders has dwindled. There has never been a more helpful time for us to evaluate how our everyday spending and consumption choices affect our planet and the small steps we can take to align our money with our values.

So, how does your banking come into it?

When we safely stow away our money away in a savings account, our bank pays us a tiny bit of interest as a small token of appreciation. At the same time, our banks often lend money to larger clients at a much higher interest rate, often investing in fossil fuel projects with detrimental environmental effects. Startlingly, the Big Four banks (think NAB, Westpac, ANZ and Commonwealth Bank) have 'fuelled the fire' by loaning over $70 billion to the fossil fuels industry since 2008.

With all this in mind, you might consider switching to a greener bank, which actively attempts to make their business practices more sustainable and reduce any harmful environmental impacts of their products and investments. Let’s break these two criteria down, shall we?

· Environmentally-friendly business practices: these may include installing solar panels on the rooves of their local branches and any emissions targets the bank has set, alongside the GHGs used in their daily operations. You can usually find out more about these practices by leafing through your bank’s Annual Report or Sustainability Report (if they’ve got one…but if they don’t, well, yikes!).

· Sustainable investment choices and products, or socially and environmentally conscious lending criteria: in much the same way that superfunds negatively screen (‘screen out’) companies that they invest in, banks too can actively avoid giving loans to fossil fuel companies and instead support social and sustainable housing initiatives, or offer home loan packages for homes that draw on renewable power sources.

A common misconception about ethical banks is that they demand higher fees, a myth that the RIAA has thoroughly debunked. You can also compare a list of ethical banks with those that have a record of investing in fossil fuel companies using these three tools from Market Forces, Finder and Canstar. 

Still not convinced? A leading European bank, Nordea, found that switching to an ethical bank is 27 times more effective for the planet than eating less meat, or taking shorter showers and trips to work via public transport. So much for that Myki yearly pass!

Angela is one of the founders of vida (VIDA Melbourne), an educational initiative committed to building the next generation of financially confident, capable and courageous young women. The team at vida run engaging and interactive workshops for young women aged 14-25 across local girls’ secondary schools, tertiary institutions and external organisations on all things personal finance. Head to vida’s website to learn more about their mission, or check out their socials filled with bite-sized pieces of money wisdom!

If you liked this article, make sure you check out Angela's first article in this Greener Agenda series about ethical investing with your superannuation.

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