The involvement of banks in funding fossil fuels
Nearly half of US bank accounts belong to one of seven major financers - what this looks like post-Paris Climate Agreement and modern solutions for consumers
‘Voting with one’s dollar’ generally refers to individual spending practices and how that carries power with purchase. As consumers we recognize the importance of financial commitments and that what we choose to purchase can be influential on a number of levels. Depositing and storing money at a bank or credit union also has an important impact. The bank will choose to lend, fund, and invest those resources as they best see fit. This could involve a wide array of projects and ventures for loaning or financing such as small business, coal mining, or solar farms (Mighty 2021). Some of the most popular banks in the country are large financers of fossil fuels, seven of which account for nearly half of all US bank accounts. According to the Rainforest Action Network, these include, in order, JP Morgan Chase, Wells Fargo, Citi, Bank of America, TD, Morgan Stanley, and Goldman Sachs (Sutherlin 2021).
For most people, their bank is solely a secure way to store money and perhaps gather a little interest. Conceptually, on some level it simply sits there for them until they may need it. However, it is being put to use and those specific uses may be harmful and counterintuitive to what some consumers may wish for. The largely influential role banks play in the expansion of the fossil fuel industry has been somewhat sheltered from the public as banks are not required to publicly report on the environmental impact of all their loans (Mighty 2021). There is also no uniform system of disclosure that requires them to declare fossil fuel financing (Mighty 2021).
It may not be that a consumer’s money is directly funding fossil fuel endeavors, as some branches of a given bank are siphoned off for different uses that are separate from the customer base. Yet the practices of the bank are to some degree supported by their consumer base unknowingly or not by their membership with the bank.
Mighty defines environmentally friendly banks with the following statement. “Broadly speaking, environmentally friendly banks are those that acknowledge that their lending and investment choices have an impact on the health of the planet and take action to decrease funding projects that harm the environment” (Mighty 2021). For those who are environmentally conscious and seeking to actively engage in sustainable ways, their banking practices could be undermining some of those efforts (Mighty 2021).
One potential watch-out is greenwashing (Mighty 2021). Some banks may be LEED Certified and print double-sided, but if this looks to be the extent of their green efforts this may be cause for alarm, notes Mighty. One example that shows a lack of true alignment and masks environmental malfeasance is one of the 60 largest banks in the world, The Postal Savings Bank of China (CNBC 2021). The Postal Savings Bank of China lent money to fund a solar powered project with green loans up 30.2% from the previous year and set up a credit program to support bamboo farmers. This is all positive, however, the Postal Savings Bank of China also had the largest percent change in fossil fuel financing of banks worldwide, up 1,200% from $168 million in 2016 to $2.2 billion in 2020 (CNBC 2021).
According to CNBC, “The 60 largest commercial and investment banks have collectively financed $3.8 trillion in fossil fuel companies between 2016 and 2020, the five years since the Paris Agreement was signed…” (2021). This shows that even after the influential climate achievement and international treaty, when fossil fuel usage should be starkly declining, that fossil fuel spend is still highly significant and for a number of banks it is even increasing (CNBC 2021).
Determining the spend and validity behind a bank’s claims and gaining insight into their use of resources can be tricky if it is not declared to the public. Consumers looking to better understand their bank and its involvement or lack thereof in fossil fuels can seek out that additional insight. For what is available information, consumers can search for their bank on Mighty. Mighty also showcases a list of banks and credit unions based on geographic location and desired characteristics that can help consumers find different and better banking solutions. For instance, the site allows users to filter preferences that show them options that are sustainable as well as can provide a number of other beneficial attributes. Such options can include banks that invest in low-income communities or being part of a bank that is women-owned, or Black owned or led. These unique offering allow for one to do much more with their money while it is being stored. Additionally, filter features online on this site allow users to ensure that the bank that they are considering still provides the services and security that they require.
Screen grab from Mightydeposits.com website
Some banks are not only refusing to partake in such fossil fuel funding but are proactively financing renewable energy projects or other efforts that offer a positive impact (Mighty 2021). Being able to switch from a bank that is deeply rooted in fossil fuel engagement to one that is instead working against it - and looking to lift up communities, is a meaningful prospect for consumers. How does your bank stack up? Until next time, stay savvy.
The content author is not affiliated with or sponsored by Mighty Deposits.
Clifford, Catherine. “These Are the World's Largest Banks That Are Increasing and Decreasing Their Fossil Fuel Financing.” CNBC Make It, CNBC, 22 Apr. 2021, www.cnbc.com/2021/04/22/which-banks-are-increasing-decreasing-fossil-fuel-financing-.html.
“Environmentally Friendly Banks: What They Are and a List of Sustainable Options.” Mighty Deposits Guide, 2021 Edition, Mighty Deposits, 2 July 2021, mightydeposits.com/posts/environmentally-friendly-banks.
Sutherlin, Laurel. “Banking on Climate Change - Fossil FUEL Finance Report 2020.” Banking on Climate Change, Rainforest Action Network, 24 Mar. 2020, www.ran.org/bankingonclimatechange2020/#grades-panel.