FaithInvest has been looking into the issue of sustainable banking – what is it, who does it, how does it work and what are the benefits and/or trade-offs of working with a sustainable bank?
Our interest was prompted by our members asking us: 'What is this thing?', says Mathew Jensen, FaithInvest's lead on Membership Engagement.
'Sustainable banking goes by a number of different names – for example, ethical banking, socially responsible banking', he says. 'This concept is relatively new but there is some interesting movement in this area and we think there's a real opportunity for faiths to have an impact.'
This is also, he adds, something faiths need to be thinking about if they are working to align their finances and their values.
To help them do so, we have produced a report, The State of Sustainable Banking, authored by Paul Goldwhite, Head of Investments at Serenissima Financial, and Mathew. You can read the report here and also an article, prompted by the report, on faiths and sustainable finance which appeared in the Catholic newspaper, The Tablet.
The importance of choosing the right bank
As the report makes clear, there are few ways a socially responsible investor can have greater impact, dollar for dollar, than through their choice of banking partner.
If the bank shares the investor’s values, every dollar the investor has on deposit can have a positive impact. If the bank does not share the investor’s values, deposits may be used to fund activities that conflict with their values.
In our Inaugural Member Conference session on sustainable banking on June 8, Mathew said it was hard to get figures for the size of the annual deposits being made by faith groups into their banks.
However, a study by Giving USA, which tracks charitable giving in the United States, found that giving to religions increased 2.3% between 2018 and 2019 (the latest available figures), with an estimated US$128.17 billion in contributions in the US alone.
'Where is that money being held, and do your bank's policies and practices align with your faith's values?' he asked.
This issue was starkly highlighted by recent headlines that made grim reading for environmentally conscious investors – about the extent to which the world's biggest banks are funding fossil fuels – including a number of signatories to the UN Principles for Responsible Banking.
The headlines were prompted by a report by the Rainforest Action Network, Banking on Climate Chaos, which found that in the five years since the Paris Climate Change Agreement, the world’s biggest banks, including JP Morgan Chase and Barclays, have financed fossil fuels to the tune of $3.8 trillion.
This is a critical issue for many faith groups, increasing numbers of which are adopting values-driven positions on climate change, including divesting from fossil fuels. If you are one of those faith groups, are your efforts being undermined because you have not realised that your bank may be using your deposits to fund fossil fuel projects? Or to provide loans for some other activity your faith does not support?
So how can a socially responsible investor find a bank that shares its values, whether on climate or other issues? And what are the trade-offs, if any, in working with such a bank?