In a time defined by climate catastrophe, more people than ever before are rolling up their sleeves and doing what they can to reduce their environmental footprint.

Much of these efforts focus on how we eat, travel, or shop – perhaps because these lifestyle factors are more immediately obvious or tangible in terms of their environmental impact.

The link between where we choose to store our money and the environment might not be as immediately apparent, but it is actually crucial to protecting the planet.

Significant amounts of the cash overseen by banks is loaned to finance various businesses, with a surprising amount directly financing fossil-fuel companies and other harmful industries.

Results from a 2019 report demonstrated that four major banks provide about a third of fossil-fuel financing, a number which is actually increasing despite global efforts to move towards cleaner and renewable energy sources.

In light of this, choosing a responsible, ethical bank or superannuation fund might just have an even greater impact than switching to a plant-based diet, quitting plastic, or ditching your car in favour of cycling to work.

How banks impact climate change

Banks are no longer mere storage sites for the cash of individuals and organisations, simply holding onto deposited funds until they are withdrawn again.

The effects of globalisation and rapidly evolving global financial markets mean that banks now play a significant role in world issues, including climate change.

Since the 2015 Paris Agreement on climate change, 60 of the world’s major banks have contributed about $3.8 trillion to fossil-fuel companies, a number which is increasing, despite worldwide collaborative efforts to tackle greenhouse gas emissions.

Banking legislations and regulatory practices prohibit most banks from directly investing your savings into corporate ventures, including fossil-fuel companies, however it is still worth considering whether you wish to support an institution that finances polluting, destructive industries.

Just as it has become second nature for many of us check our coffee beans for Fairtrade certification, or research fashion labels to ensure ethical production, the journey towards ethical financing starts with awareness.

Research your bank’s policies and how they manage their investments, either via their website or through independent reports that list the biggest financiers for fossil-fuel companies.

If you are unhappy with what you discover, you can decide to find an alternative, and inform your current bank that you are choosing to leave because you wish to support banks that demonstrate their commitment to tackling climate change.

Voting with your wallet sends a clear message to banks that environmental responsibility matters to their customers, which can have a flow-on effect that inspires change at a larger scale.

You may then decide to store your money with a company that reflects your values, such as not investing in fossil-fuels or supporting the production of nuclear weapons.

If you feel unsure, search engines like the one provided by the Responsible Investment Association Australasia (RIAA), allow you to filter financial institutions, including banks, super funds and investment products, by the social issues that matter most to you.

If you are unable or don’t want to change banks right now, it is worth directly asking your current bank how they plan to become more eco-friendly and more responsible with their investment activities.

The power of consumers speaking up about important issues should never be underestimated, especially when there is so much at stake.

Harnessing your superannuation as a force for good

Sustainability is at the heart of why many of us invest in a superannuation fund.

We willingly sacrifice some of our income and assets now so that we can sustain our lifestyles into the future, hopefully allowing a comfortable retirement.

It makes sense, then, that many people assume that their superannuation is being used to invest in environmentally sustainable businesses as well. After all, what use is a nest egg if the sandy beaches we plan to retire on cease to exist by the time we reach our golden years?

This statement may seem dramatic, but the importance of where we keep our pension savings should not be understated.

The United Nations Environment Programme estimates that combined, the largest global pension funds manage about $85 trillion, or almost half of the global investment market. This staggering amount becomes even more concerning given the fact that more than half of the world’s superannuation funds currently invest in fossil-fuels.

Alarming as this is, it is helpful to know that there is something we can do about this trend, by redirecting our funds to institutions that actually help the planet rather than perpetuate its steady decline.

As with banks, the first step is finding out what companies your current super fund invests in, and their policies on financing things like coal, tobacco or nuclear weapons. This information should be available on their website; or you may find it easier to use independent directories to compare your options and find a suitable fund that aligns with your environmental values.

Some institutions are now making climate action a key selling point for their customers, with companies like Future Super setting themselves apart by investing in climate change solutions. They estimate that if just 34 people with an average of $30,000 in superannuation switched from a fund that finances fossil-fuels, to one that is fighting against climate emergency, more than $1 million dollars will effectively be redirected from companies that harm the planet to those that are actively trying to protect it.

Navigating the complex world of financial investments, coupled with the daunting task of reversing climate change, is enough to make anyone feel intimidated. However, investing the time and energy into making conscious decisions about who to trust with our money could be our greatest opportunity to create tangible change.

With a little research, and the necessary evils of paperwork to switch financial institutions, you can play an important role in preserving the earth and all its wonders for future generations to enjoy.