Over the past few years, mainstream banks and bankers have increasingly talked about issues like ‘sustainability’. But it’s hard to tell how seriously many of these organisations really take the words. Under pressure, their commitment can be questionable- as demonstrated recently by reports that major banks are considering pulling out of the Glasgow Financial Alliance for Net Zero (GFANZ) set up at COP26.
Increasingly, mainstream banks and other large businesses are accused of ‘greenwashing’ – using environmental and related claims to burnish their image, without backing up their words with action. Greenwashing has become such a global issue that a UN-backed conference took place to address the issue.
BANKING ON VALUES DAY
In this context, it’s more important than ever to know how to tell the difference between banks that just say the right things, and those that have real substance and impact behind them. To that end, to mark Banking On Values Day 2022, which this year has the theme ‘Real Impact Behind the Big Words’, we’ve put together a short guide to help you understand if your bank might be greenwashing:
1.Read your bank’s impact reports carefully
Search them out on your bank’s website, and read about the products and services, the networks, and best practices with a constructively critical eye. Are social and green activities at the core of the business, or are they only part of a Corporate Social Responsibility (CSR) strategy at its margins? In fact, many corporates nowadays see sustainability as something nice to show off but do little more. In the pool of the existing 600 ESG ratings and classifications around the world, some lack high standards and allow companies to cherry-pick the evaluation approaches that best suit them. It would therefore be wise to not rely only on Sustainability Index marking but look closer at the banks’ own reports.
2. See if your bank finances fossil fuels
A recent Finance Watch report estimates that 60 of the largest global banks have around USD 1.35 trillion of exposure to fossil fuel assets. These assets are an increasing source of risk to banks and the financial system. If this isn’t completely clear in your bank’s own documentation and reporting (and often it is not highlighted), it’s worth looking at independent tools and tracking programmes. For example, check with green analysis tools Market Forces to see where the bank stands from a fossil fuel investment perspective. Also, you can explore the annual fossil fuel finance report by the non-profit Rainforest Action Network and a bank tracking tool by the independent organisation BankTrack. The latter also tracks whether banks finance the violation of human rights or nature destruction.
3. Check for external certifications
— or the lack of them. Banks that really have substance behind their big words will usually have this verified and celebrated through membership in one or more global schemes. For example, our own Global Alliance for Banking on Values, B Corp, Fossil Free Certified, Green America Certified and others.
4. Check if your bank is committed to reduce their greenhouse gas emissions
In the context of an accelerating climate crisis, no bank can claim to be values-driven unless it has a clear commitment and plans to reduce its emissions. If this isn’t clear in their own information (and again, it often isn’t), one way to find out is through organisations like PCAF (Partnership for Carbon Accounting Financials) and the Science-Based Targets initiative, which help financial institutions to measure and disclose their emissions, set targets and create credible plans to meet them.
5. Read customers’ opinions and satisfaction levels
As the public becomes more aware of how banking and finance have a direct impact on all sorts of social challenges and the world as a whole, bank customers are increasingly drawing attention to the gap between banking rhetoric and reality. Looking at customer satisfaction ratings and public feedback can be one way to track whose putting their money where their mouth is.
6. Look at the lending and investment criteria of your bank if it is public
On a fundamental level, the impact of a bank’s activities – and the degree to which it can genuinely claim to be ‘green’ or ‘sustainable’ – is directly linked to which sectors and activities it chooses to finance, and which ones it does not. Seeking out information on these choices, and the reasons behind them, can give a strong indication of a bank’s true character and values.
7. Use external sources and rankings
For example, the Fair Finance Guide by Oxfam International, which is available in some countries. Also find rankings like the Sustainable Banking Revenues Ranking by Corporate Knights and The Banker, or the World’s Most Ethical Companies evaluation run by the US Ethisphere Institute.
Once you’ve established if your bank is living up to its environmental and social promises, you might want to consider switching to a values-based alternative, where commitments are always backed up with real impact. The Global Alliance for Banking on Values has members all over the world. You can locate your nearest one on the map.
Do you want to know more about values-based banks? Contact us