Counting the cost – How your finances can support sustainability
October 12, 2022
When thinking about how to reduce our carbon footprint and secure a more sustainable future for our planet, money is rarely thought about. However, we cannot make meaningful steps on the road to Net Zero without addressing our finances. So, how can you support sustainability?
Providing investment to meet Net Zero
Money, as they say, makes the world go round, and channeling investments in the right manner will prove critical in ensuring we operate within Earth’s planetary boundaries. It is down to everyone to pay more attention to how our pensions are invested, what projects our savings are funding and whether the money in our bank accounts is being used to support activities that feed into the climate crisis.
The UN estimates that a $2.5 trillion annual financing gap stands in the way of achieving its Sustainable Development Goals and providing investment to meet Net Zero is one of our greatest challenges. At the same time, it is time to interrogate financial institutions that continue to prop up sectors that have poor environmental and human rights records
It is time to ensure that Environmental, Social and Governance (ESG) are at the heart of investment. Could your funds be used to back projects that help protect the environment and support social inclusion?
What effect is your money having on the planet?
There is increasing pressure to put the global financial system on a more sustainable footing. The UK government for instance has a Green Finance Strategy. They set new standards for reporting and give investors the information they need to make more informed choices.
There is a long way to go but there are more options available for people to align their values with their finances. On the London Stock Exchange, there are 260 sustainability-related bonds from 23 countries, which raised over £56bn. What could your money be doing for people and planet?
The truth is that many of us have no idea what happens to our money and as a society we don’t have a good track record at holding the financial sector to account. When your wages land in your bank account, they don’t just sit there waiting to be spent. Your bank may well be using them to fund the fossil fuel sector or support exploitation by unsavoury employers and political regimes. Are they supporting deforestation or funding the arms industry?
How your finances can support sustainability
Take the time to uncover what your institution is investing in. Look at annual reports and refer to league tables and online guides to compare the environmental and ethical credentials of different institutions. If your bank’s activities don’t sit well with your moral compass, take your business elsewhere. Remember that it doesn’t necessarily need to be a bank. Consider alternatives like building societies, credit unions and mutuals that are owned by their members and have strict rules over how money is invested.
Use the Current Account Switch Service to quickly and easily transfer your funds to someone who will use them as a force for good. Also, make the effort to write to your old bank and let them know why you are leaving. The more people that put pressure on them to change their practices the better.
The same rules apply to your pension. That financial pot is building up to a sum over a period of many years and the impact of how it is invested will be felt far and wide. The government has stated its intention to require pension scheme trustees to assess and report on the risks of climate change in their investments. Do a bit of digging to find out how your institution is behaving and whether its activities are aligned with your values.
According to research by the My Money Matters campaign, if someone with an average-size pension pot of £30,000 transferred to a greener option, they could save up to 19 tonnes of carbon a year. There are now a growing number of pension funds labeled ethical or sustainable. Don’t fall foul to greenwashing when looking for alternatives. Do your homework and check that they are true to their word. If you have a company pension, lobby your employer to make more sustainable choices and if possible, get the support of your colleagues for strength in numbers.
Want to learn more about the role of money and finance in Net Zero, or access more tips on making more sustainable choices? Take our interactive learning course. Find out more.
Being more financially savvy can go a long way to supporting the drive to Net Zero. Extend the scope to find mortgage, loan and credit card providers that make more sustainable investment decisions. We all have more power than we might think to reshape our future and put pressure on the entire financial sector to play its part in balancing the needs of people, profit and the planet.
About the author
Dr Denise Taylor is a qualified sustainability consultant who founded a family-run business, Wylde Connections, alongside her daughter in January 2020. The inception of Wylde brought together Denise’s knowledge, skills and experience gained over 30 years across three main disciplines: environmental education, strategic marketing communications, and learning and development. Find Denise on Linkedin.
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