The average annual carbon footprint of a French person is 11.2 tonnes of CO2 equivalent, while the carbon footprint of his/her savings would rise to around 15 tonnes of CO2 equivalent for 25,000 euros invested in a major French bank. (1)
In the six years since the adoption of the Paris Agreement, fossil fuel financing from the world’s 60 largest banks has reached $4.6 trillion (2)
biggest Swiss retail banks were rated inadequate by WWF for sustainability screening of loans (3)
What is the solution?
Get information and choose a bank that is taking steps to reduce the carbon emissions, in particular by stopping financing fossil fuels and by expanding its investments in clean energy and sustainable businesses. This requires a defined and robust process for screening loan requests that will reject applications that are deemed too carbon intensive.
In general, shareholder-based banks are less virtuous, as they often focus on the short term and returns above all. Cooperative banks are generally more ethical or greener because of greater pressure from their members.
Why is it important?
Banks play a key role in the climate equation. They are essential for financing the transition, but they can also contribute to worsening climate change by financing the development of activities that are incompatible with international climate objectives, such as fossil fuels. Depending on the bank where it is located, money can become the largest contributor of CO2 emission for an individual or an organisation. (4)
The carbon footprint of a bank has two elements: the operations of the bank itself (its office buildings, computer servers, executive travel, etc.) and the loans it makes to other entities. The efforts a bank makes to reduce emissions from its operations are the same as any service-provider: buying energy from renewable sources, using teleconferencing instead of flying, etc. The bank’s financing activities, however, have a potentially much greater impact on the climate and can drive major changes in our societies. Banks are relatively free to choose who to lend to and for what and typically have different criteria from bank to bank. For example, bank A may agree to provide a loan to a power company to establish a new open-cast coal mine, whereas bank B may refuse on the grounds of the project’s impact on the climate.
Most of a bank’s resources are based on deposits from customers (individuals, companies, communities). The volume of money deposited determines the lending capacity of a bank to other businesses, and thus its importance and influence. The financial volumes of aid organisations can sometimes be very large. To illustrate, the final ICRC budget in 2021 was 2.37 billion CHF. (5) If such a large organisation decided to withdraw its deposits from its bank and deposit them with a more virtuous bank, not only would the organisation contribute to significantly reducing its climate impact and financing more sustainability, but, given the large volumes of money involved, it would also send a strong signal to its bank, which would likely elicit a management response and possibly a change. If such organisation also decided to communicate publicly about its choice, it could even provoke reactions and developments from the wider financial community.
#1 Question your current bank
Start a dialogue with your bank about their efforts to decarbonise their operations and investments. What policies and targets have they established?
#2 Change banks
If your bank is not taking climate change seriously, switch to a bank that is. In particular one which stops financing fossil fuels and expands its investments in clean energy and sustainable businesses.
#3 Lobbying banks as a shareholder
If you hold a bank’s shares in your investment portfolio, speak up at the Annual General Meeting and demand that the bank stops funding companies and projects that have a high carbon footprint, such as financing fossil fuels.
#4 Ask for help
Organisations with expertise in finance and green finance issues will be happy to help you take the plunge and guide you through the process of questioning or switching banks. (6)
According to specialist NGOs, such as Oxfam and Reclaim Finance, although no bank is perfect, some institutions offer credible guarantees of their willingness to respond to the climate emergency, such as La Nef, Crédit Coopératif and La Banque Postale in France. The NEF, for example, would only finance projects with a neutral and positive impact, particularly those involving renewable energy and organic farming. Crédit Coopératif would serve the social and solidarity economy by supporting companies and organisations involved in the real economy.
Some large banks such as Crédit Mutuel are also gradually making the ecological transition. It is currently the only French bank to publish the entire carbon footprint of its credit portfolio as well as the breakdown of its carbon footprint by sector of activity. In addition, in October 2020, the bank also committed to reducing the carbon footprint of its corporate portfolio by 15% by 2023. While there is still a long way to go, these announcements show a degree of progress. (7)
Triodos Bank has become one of the most sustainable banks in the world by implementing extensive minimum standards for the companies it invests in and thus excluding fossil fuel companies and favouring renewable energies. It has been a certified B Corp since 2015 and is a member of the Global Alliance for Banking on Values. (8)
La Banque Postale
The UBS was given the highest overall sustainability rating amongst the 15 biggest Swiss retail banks in a 2020/2021 study by WWF Switzerland. It was the only bank in the study to score above-average marks across all the elements of corporate governance, savings, investments and pension provision, and loans and financing. (11)
Alternative Bank Switzerland
The business activities of Alternative Bank Schweiz AG are strongly oriented to furthering the common good, humanity and the natural world. Founded in 1990, ABS has total assets of more than CHF 2.2 billion and over 42,000 customers. As a socially and environmentally responsible bank, it emphasises its ethical principles and appears to be moving away from the priority ‘maximising profits’ above all else. (12)
Tools and good practices
Bank change (change de banque)
Understand the link between finance and climate and evaluate different French banks (in French)Read here
Online bank account carbon footprint calculator
By Oxfam France (in French)Read here
Coal policy tool
Analysing the coal policies of financial institutions, by Reclaim FinanceBrowse here
Oil and gas policy tracker
Tracking policies to restrict support to the oil and gas industry, as well as detecting loopholes and flaws to ensure the financial sector is effectively contributing to the 1.5°C climate goal, by Reclaim FinanceBrowse here
How to pick a bank on a dying planet
Eight questions to ask your bank in 2022. Is your bank hurting or helping the planet? Here’s how to find outRead here
Resources for moving your money to a greener bank
By stopthemoneypipelineRead here
Fossil free banking options in the USA
A tool developed by Bank for Good to find a bank, credit union, or other financial institution that does not fund fossil fuelRead here
Find a socially & environmentally responsible credit card
A list of American socially and environmentally responsible credit cards, made by Green AmericaRead here
Choose your bank guide
By Les Amis de la Terre FranceRead here
To go further
Investments and pension funds
(1) 20 Minutes, Climat : L’épargne est-elle un poids lourd de notre empreinte carbone ?, 2022. In French. Read here.
(2) Banking on Climate Chaos, Fossil Fuel Finance Report 2022. Read here.
(3) Sustainability in the Swiss Retail Banking Sector: WWF Rating of the Swiss Retail Banking Sector 2020/2021, WWF Switzerland 2021. Read here.
(4) Oxfam France, Comment les banques françaises aggravent les changements climatiques, 2022. In French. Read here.
(5) ICRC Annual Report 2021: Facts and Figures, Read here.
(6) Change de banque. In French. Read here.
(7) Oxfam France, Comment les banques françaises aggravent les changements climatiques, 2022. In French. Read here.
(8) Triodos Bank, ‘Our minimum standards provide the boundaries on what we finance’. Read here.
(9) Banking on Climate Chaos, Fossil Fuel Finance Report 2022. Read here.
(10) La Banque Postale, ‘La Banque Postale is stepping up its decarbonisation strategy’. Read here.
(11) Sustainability in the Swiss Retail Banking Sector: WWF Rating of the Swiss Retail Banking Sector 2020/2021, WWF Switzerland 2021. Read here.
(12) Alternative Bank Switzerland, Exclusion Criteria. In German. Read here.
Cover photo © Tony/Pexels.