How Sustainable Is Your Bank? Here's How to Tell and Why It Matters
Before opening a new account, look at the way they are addressing climate change within their institution.
Choosing the right bank for you comes with its own due diligence such as considering fees, online apps, security, and budgeting services. However, have you ever taken the sustainability standards of your bank into consideration? According to a report from the Rainforest Action Network (RAN) called "Banking on Climate Chaos," there are several unsettling ways in which global banks contribute to climate change. In the five years since the Paris Agreement, 60 of the world's biggest banks have invested $3.8 trillion in fossil fuels. That funding has consequently resulted in increased Indigenous rights violations, wildfires, pollution, and health impacts. In order to build a greener world, conscious consumers have the crisis of climate change at the forefront of their decisions about money—and this includes financial institutions.
Understand how they store data.
Unfortunately, that's easier said than done. Gary Lyng, chief marketing officer at Aparavi, a leader in data intelligence and automation software and services, explains that some banks don't necessarily know if they're sustainable or not, "because they don't know how much emissions come from their power-hungry data centers. Data centers are notorious pollution emitters whose customers don't know the environmental cost of storing large sums of data in the cloud."
Lyng adds that as banks change over to colossal data infrastructure to the cloud, the number of data centers as data will replicate over time. Today, information and communication technology industries account for 1.5 percent of the total global carbon footprint. It is predicted by 2040, they will account for 14 percent.
Research their investments and carbon-reducing initiatives.
Know where your money is going. Inquire about any sustainability commitments as shared by the company, and whether they are addressing climate change through applying their capital and data to assist (and educate) their customers' migration to a low-carbon economy as well as develop technologies to do so. It could be due to the seismic shift in conscious consumerism, but even traditional banks are joining the ranks—JP Morgan Chase pledged to invest $2.5 trillion in sustainable projects over the next decade, while Bank of America promised to spend $1 trillion on such projects by the year 2030.
Consider alternative banking options.
It's worth noting that there are more and more eco-minded institutions emerging in the financial space. Look to banks such as Aspiration, City First Bank, and Amalgamated Bank—they have all become Certified B Corporations by focusing on the triple bottom line: people, planet, and profit. Many of them support low-income communities and minority-owned businesses, offer perks like "plant a tree with every purchase" and services like paper-free billing, as well being powered by renewable energy.
And if you want to understand the full scope of impact, consider this: According to a study done by the European bank Nordea, moving your assets to a sustainable bank account is 27 times more effective in reducing carbon footprint than if you flew less, ate less meat, took shorter showers, and took public transportation combined.