Money saved in your pension, or left in the bank, may be used to finance carbon emissions. For many people, this feels wrong as they work hard in their own lives to cut their carbon footprints. By moving to greener finance, especially for people with higher levels of saving, you may have the potential to cut more than a tonne from your carbon footprint.
How does this work in practice?
Banks take deposits from customers, which they lend to companies to earn a profit. The 60 biggest banks have lent $4.6 trillion to fossil fuel companies since the Paris agreement, which those companies use to explore and extract oil and gas. In a similar way pensions are often invested in the stock market, which provides another source of funding to fossil fuel companies who, over time, have become very efficient at turning every pound, dollar, or euro into carbon that they can sell.
What can you do to green your finances?
1. Look at your pension and investments and divest from all fossil fuels.
2. Switch to more sustainable funds including ESG funds. Look out for funds investing in line with cutting emissions by 50% this decade. The moreyousave, the more you’ll reduce the emissions you are financing with these steps.
It’s not all on the individual
In 2022, more and more people have written about the importance of the individual. The UN’s IPCC report on mitigation dedicated achapter to individual action and even the final text at COP27 talked about the need for individuals to shift to sustainable lifestyle and consumption which follows on from the UN’s Sustainable Development Goals. However, whilst individuals need to cut carbon, solving the climate crisis it not all on them. Companies need to provide low carbon goods and services and governments need to set clear, long term policies that allow people, and organisations, to plan ahead so they can make the transition to a low carbon economy. There is no single group that can solve the climate crisis, it’s only by working together that we can tackle the sheer scale of the change that is needed.