Traditional banking has hurled us towards a path of climate destruction, argues Joel PenroseCredit: Stephen Graupner | NYT

For the vast majority of people, not much has changed in banking in many years - a bank remains simply a convenient place to store money. The disastrous effects of traditional banking are rarely even considered, let alone acknowledged, and though banking must be accepted as an inevitable part of the modern system, these effects can be mitigated. The solution lies in banking ethically.

First we must consider what constitutes ethical banking practice. As the threat of environmental catastrophe looms ever larger, it can no longer simply be defined as an adherence to traditional morality. Human and environmental issues have become so intertwined that it is no longer possible to separate the two. Thus the financing of an affordable housing project that ignores environmental concerns is not ethical despite its promise to alleviate social ills; a bank can only be truly ethical if it demonstrates a commitment to tackling environmental issues. This must be taken into consideration in the search for ethical banking alternatives.

“A bank can only be truly ethical if it demonstrates a commitment to tackling environmental issues.”

However, the sad truth is that ethics rarely plays a role in people’s choice of bank. Students are lured into the big high street banks with promises of freebies and overdrafts and never look back. Few people understand the wider impact of their actions. Few people realise that their money is being poured into arms and fossil fuels; just as worrying is how few people seem to care.

And yet we should care. Since the signing of the Paris Agreement in late 2015, banks have provided a staggering $2.7 trillion of investments into fossil fuels according to the most recent report. Needless to say this is not in line with the target to limit global warming to 2 °C, but rather shows no concern for environmental issues at all.

Furthermore, investment is not limited to the domain of conventional fossil fuel extraction. In recent years banks have begun to pump more and more money into tar sands: a particularly wasteful and destructive form of fossil fuel extraction that involves imbuing oil rich soils with steam, with devastating results for the surrounding environment and water supply. Barclays alone has funnelled an estimated $3.2 billion into this industry since 2015, and with the industry on the rise as more and more conventional oil wells dry up, this figure is likely to only increase.

Yet more alarming is that such investments seem to be increasing. Overall fossil fuel financing, for example, has grown by 15% since 2016 and will continue to grow until consumer pressure forces it to stop. The modern system is one governed by public opinion, and thus public opinion alone has the power to force these big companies to change their slippery ways. This is a process that begins when people start to care about the ethics of their bank and act on their misgivings. It is a sad fact that virtually all the high-street banks are implicated in unethical banking practices. However it is important that we are not disheartened: there are excellent alternatives, if one knows where to find them.

“The modern system is one governed by public opinion, and thus public opinion alone has the power to force these big companies to change their slippery ways.”

Building societies may offer part of the solution. These cooperatives, unlike banks, only invest in housing and are designed to help people obtain mortgages. Though most are localised and do not offer current accounts, the big ones, such as Nationwide, offer excellent services to match those of more established banks. However, though building societies may not invest in fossil fuels or arms, they do not commit to positive environmental change either.

Challenger banks are also another alternative. Keen to differentiate themselves from their mainstream rivals, these modern, typically cloud-based banks are generally more transparent and committed to ethical practices. With unfamiliar names like Starling, Revolut, Monzo and Atom Bank, it will take time for them to build up public trust and truly begin to threaten the position of the established banks, though the remarkable success of banks such as Monzo and Starling in recent years is an indication that times are changing.

However, we must not get carried away: though they do tend to be more ethical than the ‘big five’ high street banks, growth, rather than ethics, remains their priority. They alone will not provide the antidote to the slimy practices of modern banks.

For this we must turn to the one bank that shines out above the rest: Triodos Bank. Triodos is a Dutch firm committed to an agenda that ‘protects and promotes quality of life and human dignity for all’. Since its founding in 1980 it has invested over £6 billion in projects that benefit both people and planet and as a totally transparent, green and effective bank, Triodos is the best option for those seeking to reduce their impact. However so far it has failed to cultivate a large following. Apart from its relative obscurity, the main stumbling block for most is the £3 monthly fee for holding a current account. However this small cost, consisting of little more than one morning coffee, is a small price to pay for the huge environmental benefits of ethical banking.

Though the banking revolution is well underway there is a long road ahead before ethical banking becomes the norm. Between them the five largest high street banks - HSBC, Barclays, Royal Bank of Scotland, Santander and Lloyds - still hold 85 percent of all personal current accounts; Santander alone has over 150 times as many customers as Triodos. The importance of getting large institutions such as the University of Cambridge to cut their ties with banks such as Barclays, currently the fifth largest investor in fossil fuels in the world, cannot be understated. It is a little understood fact that the university cannot achieve full divestment from fossil fuels until this happens.


Mountain View

Technological advances for an environmentally sustainable world

Unbeknownst to many, ethical banking is one of the single most effective ways of reducing one’s carbon footprint; it is not a choice but a necessity if we are to stand a chance in the fight to save our planet from environmental destruction.