When you put money in the bank, it appears as if it is sitting there and can be withdrawn at any time. In reality, your financial institution makes money by lending money to other places, such as fossil fuel companies that drive climate change and high-emission industries like manufacturing.
So just by putting money in your bank account, you’re unknowingly contributing to: A worsening disaster In the world.according to new analysis, every $1,000 the average American saves indirectly creates emissions equivalent to a flight from New York to Seattle. Jonathan Foley, Executive Director of Project Drawdown, who published the analysis, said: “Banks are not really aware of how the money we keep in our checking accounts is used on a day-to-day basis. “We haven’t really investigated where it actually circulates.” . “But when you look under the hood, you see a lot of fossil fuels.”
Switching to climate-smart banks can reduce these emissions by about 75%, the study found. In fact, if you move a US customer’s median balance of $8,000, his indirect emissions reduction will be double the direct emissions he would avoid if he switched to a vegetarian diet. Masu.
In other words, you as an individual have a carbon footprint. drive a car, eat meatoperate a gas furnace instead of heat pump— but your money Also There is a carbon footprint. Banking is therefore an underappreciated but powerful tool for tackling climate change at scale. “It’s not just voting every four years, it’s not just not eating hamburgers, it’s also very important where your money is,” Foley said.
Just as we can borrow money from banks, fossil fuel companies and the companies that support their industries are also looking to build pipelines and other infrastructure. “Even if they’re not building new pipelines, whether they’re maintaining the network of gas stations they own, maintaining existing pipelines, or paying their employees, fossil fuel companies are doing business as usual. “We’re going to need funding to do this,” said Paddy McCurry, senior analyst at Reclaim Finance, an NGO focused on climate action.
Fossil fuel companies’ need for such financing varies from year to year as fuel prices fluctuate.there you, “The money that individuals put in their bank accounts allows banks to lend money to fossil fuel companies,” said Richard Brooks, director of climate finance at Stand Earth, an environmental and climate justice firm. To tell. Support group. “If you look at the top 10 banks in North America, each bank lends between $20 billion and $40 billion to fossil fuel companies every year.”
A new report finds that 11 large U.S. banks, on average, lend 19.4 percent of their portfolios to carbon-intensive industries. (The American Bankers Association did not immediately respond to a request for comment for this story.) To be clear, oil, gas, and coal companies would not continue producing these fuels if humanity went extinct. You can’t do it. We need to reduce our carbon footprint Without these loans, dramatically and rapidly. New fossil fuel projects are not just one-time initiatives; they operate for years, locking in a certain amount of emissions into the future.
At the same time, Brooks said, the big banks: under-Financing the green economy. If we as a civilization want to avoid the increasingly worsening effects of climate change, we are investing in the wrong kind of energy. Yes, 2022 was the first year that climate finance exceeded the $1 trillion mark. “But the worrying thing is that climate finance needs to increase by at least five times each year as soon as possible to mitigate the worst impacts of climate change,” said Valerio, senior manager of climate policy initiatives. Micale says. “A further important consideration is that the costs of inaction, which will cumulatively reach $266 trillion by 2050, are miniscule compared to the costs of inaction, which are estimated to be more than $2,000 trillion over the same period. is.”
At least small banks are less likely to finance fossil fuel industries. Because credit unions are more local, they are much less likely to advance financing for a new oil pipeline, for example. “Big fossil fuel companies go to big banks for financing,” Brooks said. “They’re looking for hundreds of millions, even billions, of dollars in loans, and credit unions won’t be able to provide that.”
This makes banking a uniquely powerful tool for combating climate change, Foley said. compared to switching to vegetarianism or veganism to avoid Large amounts of carbon emissions associated with livestock farming, Money is easy to move. “When a lot of people start telling financial institutions that they don’t really want to invest in fossil fuels, you start to see a gradual drain of capital from what could be used for fossil fuels,” Foley said.
Although the new report stopped short of a thorough analysis of the lending habits of thousands of U.S. banks, Foley said more banks are intentionally not investing in fossil fuels. If you don’t know what your bank is investing in, you can always ask. “When you hear that we need to shift capital away from fossil fuels and into climate action, you probably think Warren Buffett is the only person who can do that,” Foley says. “That’s not entirely true. We can all do a little bit of that.”
This story was originally wired.com.
