Let's start with the beginning.
What is finance? It is a field of activity which makes it possible to find the money necessary to carry out an economic operation.
When we talk about “green” or “environmental” finance , we are talking about all the financing which aims to support the energy transition, the fight against global warming or which impose an environmental transition on the behemoths of the economy. Basically, the money is used to finance projects that do not (or less) harm the environment. Does it speak to you? We dig into the subject for you.
Some figures on environmental finance
According to the latest figures from Oxfam France and Carbone 4 for the year 2020, the carbon footprint of the 6 largest French banks is 8 times greater than that of the whole of France . Huge, right?
Knowing that in 2019, a French person had an average carbon footprint of 9.9 tonnes equivalent, multiplied by 67 million people, I'll let you do the math - bruuh it gives chills .
Almost worse, this figure is not improving at all. One would think that between the COP21 , the Paris agreement and the alarming reports of the IPCC , the banks would see it as a warning signal and would at least choose to change their way of investing. But that's a big no for the majority.
Since 2016, investments in sectors harmful to the environment have increased by 15%. You don't see what that means? Well we help you… it's no less than 3100 billion euros invested globally in fossil fuels in 5 years .
At this rate, our 3 largest French banks (BNP, Société Générale and Crédit Agricole) are leading us on the path to a world at +4°C by 2100 , when we know today that exceeding +2°C would be a point of no return for humanity and the planet.
As France's champion polluter, banks are the ones who can have the strongest impact as quickly as possible, but are they aware of this? We went to meet them to ask them the question, and here is a summary of what they told us.
What we understood : they are aware of the role they have to play in the change. Some banks are starting to set zero emissions targets to be achieved by 2050 (yes, that's very far away) and in the meantime some have started to decarbonize their financial activities. So that's fine, but that doesn't solve the problem.
What we think : today to decarbonize, all you have to do is buy a right to pollute on the dedicated market. Planting trees to invest in fossil fuels does not help the environment or biodiversity. The benefits will be delayed by 10 to 15 years, at best, the time that the forest unfolds and it will be planted surely 20,000 km from the ecosystems destroyed by the investments of our banks. Not to mention the fact that we have very little traceability on the planting of trees, and if they are not planted according to an agroforestry logic, the benefit is roughly equivalent to the mass planting of Christmas trees. We spare you the blabla, you understand.
According to OXFAM France, some banks like Banque Postale are trying somehow to improve. For example, by almost instantly suspending “its financial services to companies that contribute to the expansion of oil and gas”, the Postal Bank does not stop financing fossil fuels completely, it does not contribute to its expansion. And yes , we can't decide overnight to no longer finance “sin stocks” (everything that is morally dubious), because we haven't yet found all the solutions to replace our everyday objects that depend on them.
There is really only one solution: invest better and stop offsetting.
Actions to be taken with traditional banks to be agents of change:
- Ask your bank advisor where and how your money is used
- Learn about the investments of our banks to better understand
- Talk about it around you to raise awareness among your loved ones and that everyone talks about it in turn
If everyone plays the game, the banks will have no choice but to commit at the risk of losing the majority of their customers.
Digital banks and neo-banks
They are more and more numerous and are making more and more noise in the financial sector. These are 100% digital banks . Their goal is to provide smooth, easy and fast customer service. You may recognize Orange Bank or N26 which are European leaders. Among them, neo-ethical banks form a sub-part in their own right. Their only goal: to better invest their clients' money . French examples are Hélios and Green Got . These young banks offer transparency and commitment to their customers - amazing isn't it? It's up to you to make up your own mind
The difference between them and traditional banks is very simple, they undertake not to finance sectors that threaten the environment. Because if you hadn't already understood, choosing our bank would be the first step in a transition to more responsible consumption.
If you are still not convinced, we invite you to calculate the carbon impact of your money using this tool developed by OXFAM. Hang on, you won't be disappointed with the experience...
There are also other banking alternatives that are neither traditional banks nor neo banks. Banking cooperatives are also a great opportunity for change. The NEF is the perfect example. Founded in 1988 by citizens who were unable to finance their ecological and solidarity projects, the Nef is today a major actor of change because it finances hundreds of local, solidarity and ethical projects.
In 2020, 114 billion euros were lent ( the exact breakdown is available here ).
Banks are responsible for their investments but governments have a duty to their citizens to protect their best interests, so by extension the planet - it's true that being without a fixed planet would not be in our interest .
On the government side, the SFDR - Sustainable Finance Disclosure Regulation - adopted at the end of 2019 requires financiers to offer more sustainable investment options to savers. The reality isn't as pretty as this flashy title might make you believe; the “more sustainable” elements are just the best performers in their midst – they are called “best-in-class” investments.
Nothing prohibits investing in unethical and unsustainable projects. The only limit is that you have to do better than worse. At Oé, we know that we can do better than settle for the worst.
There are also markets that allow decarbonizing investments (paying for the right to pollute) where banks and other companies make a profit on the back of the planet - it's really great all that...
So yes, it's not easy to change an entire financial system. There are other societal issues to consider. But that's no reason to do nothing and wait without making things happen. The likelihood that citizens engaged in the ecological transition will push our traditional banks not to sign the death warrant of our ecosystem is minimal.
Making a strategy out of the vice may well be our only hope. If our leaders or even Europe impose on the banks to no longer encourage the destruction of our planet in parallel with a citizens' movement which pleads for greener investments, it is difficult to imagine that nothing will change. As they know so well, it's all about the law of supply and demand .
On our side, we wondered what role companies had in this disaster scenario.
Verdict : They are at the heart of the solution. We know that the 20 largest companies in the world are responsible for 35% of greenhouse gas emissions . Which means they can also become the drivers of change by changing their habits and leading by example. The role to be played by companies is not directly proportional to their size - the proof at Where we move mountains . The actions are different but equally important: the smaller you are, the faster you move.
In the business world, everyone has the means to act in favor of the environment.
Here are some ideas for reducing your environmental impact as a business :
- go to another bank or invest your money in a banking cooperative like La Nef
- review its supply chain to work with partners who are more respectful of our dear planet
- for start-ups/or investors at heart: go to a green family office like KIMPA
- Informing its customers, opening the conversation, educating, discussing, etc.
Obviously none of this is easy or quick to set up, but it is a daily effort. At Oé, we are not perfect and we do not claim to be finance professionals. We're just trying to put the right cards in your hands so that you can form your own opinion. We have a real desire to see a positive evolution of our model. The power is in our hands.
We offer you a list of books, articles and actions to dig deeper into the subject and form your own opinion on the subject. What do you say?
• To go technical: The illusion of green finance – Julien le Fournier
• For more figures: Banks: commitments to be made at the 4th degree
• To change our banks: How to put banks at the service of the climate?
• To find out more about neo-banks
In other words: For an ecological awakening
On the associative side: Reclaim Finance