Spotlight on…green finance
23rd August 2022
In this ‘Spotlight On’ article as part of the Climate Action Programme, Ellen Harrison, Marketing Manager at Triodos Bank, outlines how your organisation can take the lead in pioneering climate action through the conscious use of money.
What is sustainable finance?
It matters how money flows. The decisions you make about money as a business have an impact in the world – as does how your employees use their own personal finances.
The finance sector has long perpetuated an image that its impact is neutral, whilst continuing to make huge profits for shareholders. However, financial institutions have power through where they lend and where they invest, and with that comes responsibility. Through funding rewilding instead of deforestation, community projects instead of arms companies, or renewable energy instead of fossil fuels, the finance sector has the power to support positive environmental and social change.
As consumers and businesses, we all have a role to play, since we can choose where our money is going and what it is doing. So, as you’re planning your route to net zero, and thinking about how your business can be a force for good, finance should be part of those conversations and decisions.
How businesses can green their finances
Choose sustainable and ethical loans
If you’re looking for a business loan or other type of finance for your organisation, then you should carefully consider which company you take money from. Analyse the financial provider in the same way you would any other supplier – with consideration of the wider environmental impact and social responsibility.
Ideally, you’ll be working with a banking partner or investor whose values match yours. If they share your values, they will be thinking not only how they can support you financially but also how they can support your social and environmental aims. To find a financial organisation that is environmentally and socially minded, you can ask a few key questions and do a bit of research:
- How transparent are they? Who else are they lending to and investing in? How readily available is that information?
- Do they have a net zero target? Are they reporting on their carbon emissions?
- Are they a member of the Global Alliance for Banking on Values, a network of sustainable banks? Or the UK Sustainable Investment and Finance Association?
- Are they assessing and disclosing the carbon impact of their loans and investments, using a recognised methodology such as that pioneered by the Partnership for Carbon Accounting Financials?
If you’re looking for funding to help move your climate ambitions forward, do check out this spotlight on funding your net zero strategy by Simon Pyne.
Green your pension scheme
According to the ‘Make My Money Matter’ campaign, there’s about £2.7 trillion invested in UK pensions. Currently, a large proportion of this money is funding harmful industries. The campaign is asking for organisations to match the pensions that they offer their employees with their values – namely by calling on the pensions industry to agree net zero targets for all investments, and engaging with trustees and pension providers to explore how staff pension schemes can align to net zero before 2050. Sign the Make My Money charter and have a read of the Green Pensions Guide for organisations on their website.
Most people stick with the default pension option provided by their employer, yet for many individuals a pension is the biggest investment they’ll hold in their life – and it’s likely that they don’t realise the impact this money could have. Research shows that moving towards a greener pension is 21x more powerful for combatting climate change than the combined impact of stopping flying, going vegetarian, and changing energy supplier. Employers therefore have a real responsibility to help change the default options for pension provision to greener alternatives.
Switch your business banking
As with choosing a loan provider, try to choose a bank whose values align with yours. Does their lending policy lead to positive social and environmental outcomes? Do they avoid investing in damaging and unethical companies? Do they pay their taxes?
This article from Ethical Consumer compares the business banking options for small businesses, charities and community organisations.
Make sustainable investments
If you’re looking to invest your organisation’s money, make sure you understand what the money is going to be doing, and the social and environmental impact of your investment. There is so much more to be gained than just the return on your investment, for example, by investing in local nature projects, community initiatives or renewable energy projects.
Support employees to take action
It can be difficult to talk about money, with women often feeling particularly disempowered, so try to create safe spaces for conversations amongst employees about the link between climate and finance and how colleagues can green their finances. Make sure that finance is a part of your organisational climate action plan and find ways to engage your employees on the topic.
- ‘Banks, climate change and the environmental crisis’ article on Ethical Consumer
- My Fair Money offer information on sustainable investing
- Money Movers are training women and non-binary people to host conversations about money and the planet with friends, colleagues and neighbours.
Ellen Harrison is Marketing Manager at Triodos Bank, who are a member of the Climate Leaders Group. Please note that none of the above can be considered financial advice.