How moving your money could help save the planet
The money in our bank accounts, savings, investments and pensions is fuelling climate destruction. FT deputy news editor Alice Ross questions whether changing providers can safeguard returns while protecting the environment
Produced, filmed and edited by James Sandy; motion graphics by Russell Birkett
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If you think about the greenest thing you as an individual can do from the comfort of your home, you'll probably picture recycling, going vegan, or using less water, gas, and electricity. Actually, choosing where to put your money could have a much bigger impact. Because in many cases the institutions we trust with our savings, investments, pensions, even our current accounts, are investing in fossil fuels. And the total volume of that investment has grown each year since 2016, when world leaders signed the Paris Agreement on climate change to limit global warming compared to pre-industrial levels.
So, could moving your finances be the greenest thing you ever do? Let's look at some of the arguments for and against. Recent analysis estimates 35 of the world's biggest banks have financed fossil fuel companies to the tune of a collective $2.7tn since the Paris Agreement was signed. JPMorgan Chase tops the rankings, lending $269bn over the last four years.
Seventh place Barclays leads its competitors in Europe, contributing $118bn over the same period. The money in your current account is probably ring-fenced from the investment arms of these banks. But that hasn't stopped green organisations running high-profile campaigns, urging customers to take their money elsewhere. Some have even brought in some celebrity firepower.
Hi, I'm Jane Fonda. This video is not for you, it's for someone else. That person is Jamie Dimon, CEO of Chase. Jamie, move Chase's money out of coal, oil, and gas now. If you don't, we'll leave your bank. We'll cut up our Chase cards and find a better bank.
For anyone tempted to make the switch, there have never been more green banks to choose from. By the end of 2019 there were almost 30 institutions recognised by the Green Finance Institute for their sustainable investment practices. But dropping your bank for environmental reasons isn't as cut and dried as you might think. Many argue the biggest fossil fuel backers have a significant influence on the energy sector. And as a customer of that backer you have more power to steer their decisions from within. It's the same story with your investments.
Bill Gates famously said that so far, fossil fuel divestment has had zero climate impact. Because new investors have been ready to pick up any stocks, shares, or funds being sold off. Meanwhile, fossil fuel lenders have already started to shift their investment policies, thanks in no small part to shareholder action around climate issues. In February 2020, NatWest pledged to become Paris aligned. This was followed by climate pledges from Barclays in March, Morgan Stanley in September, JPMorgan Chase and HSBC in October, and TD Bank in November.
Last year was also a record for sustainable funds. Total assets in these funds reached $1.7tn, up 50 per cent over the year. So when it comes to personal investments, just as with banks, green options are available, both within traditional institutions and beyond. Where our options may be more limited is in our choice of pension.
According to a recent study of global pension assets, 22 major pensions markets now manage nearly $47tn between them. That's about half of all the money invested in the global financial system. And so far little of it has been directed towards sustainable projects. In 2018, for example, less than 1 per cent of assets in the world's largest 100 pension funds were invested in low carbon solutions. This has led campaigners like Richard Curtis to make action on pensions their top priority.
People are going to realise what a piece of Finnish research says that changing where your money is invested is in fact 27 times more effective in reducing your carbon footprint, for instance, than going vegan, taking fewer flights, and using less water, all put together.
The process isn't simple and it can introduce more risk. But if you want to make your pension more green there are online resources with advice on how to do it, either by switching your money to a more sustainable pension fund offered by your provider or by switching provider altogether.
When it comes to personal finances, we each have the choice to stick or twist. It's a personal choice, and climate change may be just one factor among many in that thought process. But if you do want to make your voice heard on climate change, then moving your money, or threatening to move it, could be a powerful tool of persuasion. Whatever you decide, it's never been easier to act than right now.