Fossil fuels and other climate-risky endeavors are still big money for banks; and even if consumers find their bank continues to fund them, it’s something they often feel powerless to change.
For all of our ongoing efforts to reduce emissions, use better materials and adopt other climate-friendlier practices, one of the biggest barriers to moving the needle still revolves around money.
A new Bank of the West report released today highlights some of the resulting disconnects with consumers: Although 79 percent of respondents are “passionate” about climate change, only 22 percent actually know if their bank is financing fossil fuels.
“Increasingly, we’re seeing that ESG is the most important factor in choosing a bank,” Melissa Fifield, Bank of the West’s head of corporate social responsibility & sustainability, told Sustainable Brands™.
The San Francisco-based institution appears to have transparent and stringent environmental financing policies compared to many of its peers in the US; so the report is as much of an opportunity for the bank to walk its talk as it is to shine a light on big finance’s role in the climate conversation.
“We stand out from our competition in the specific financing policies we have in place, and how that appeals to Gen Z consumers,” Fifield says.
As investment advisor Vanguard found out last fall, financial transparency matters more than ever; and moving in the wrong direction can have business impacts well beyond the bottom line.
Not surprisingly, younger generations know and care more
The report found the highest awareness of bank-related climate funding landed with millennials (24-39) and Gen Z (18-23) consumers. Of course, those age groups care more as a whole about how their purchases can make a difference; but translating that to banking is a much more difficult task.
The report illustrates that obstacle, finding that 66 percent of respondents would stay with their bank, even after learning it had “no restrictions on financing certain commercial businesses, areas or sectors” (regardless of perceived impact). However, 61 percent of Gen Z respondents said they would change their bank if they knew their current institution was financing fracking, for example.
While more and more banks have begun to mobilize around climate change and have made individual net-zero pledges, their continued investment in polluting sources of energy flies in the face of those pledges — and external pressure is mounting for them to put their money where their mouths are. December saw a promising move to phase out coal financing from British banking giant HSBC; but the grandaddy of all investors, BlackRock, continues to hedge its bets on forgoing financing for fossil fuel companies. Fossil fuel-producing businesses are still big money for banks — to the tune of trillions of dollars — and it’s something that consumers often feel powerless to change in the grand scheme of the climate conversation.
In response to this, consumer awareness campaigns from activist organizations such as Bank.Green have emerged to make it easier for individual investors and banking customers to discover where their banks’ money is going — and, if necessary, to move their money into institutions whose practices align with their values.
Sustainable finance is good for business — internally and externally
While it’s not surprising that a bank-funded report would highlight data supporting the reputational benefits of climate-friendly financing, what was surprising was the positioning of how internal stakeholders could help advance those conversations.
“When it comes to the response of business leaders, mid-level executives are an untapped resource,’ Fifield says.
By and large, the report found more than half of director- and manager-level employees didn’t know if their company’s bank was financing efforts such as Arctic drilling, coal power plants or deforestation. It also found that these middle managers are more likely to ask for changes in their company’s financing plans as opposed to those at the top (VP or higher).
Granted, those types of structural changes are easier said than done; but it does show that these mid-level, typically younger, employees are ushering in a new era of transparency demand, and it would serve both companies and banks to embrace and execute around that.
Limited insight into its own future strategy
When asked about how these findings could affect the Bank of the West’s future — and its sale to Bank of Montreal, expected to close at the end of the year — Fifield said she couldn’t comment openly about the latter, but did note that they are focused on what they’re doing today.
She explained that the bank is two years ahead of schedule in meeting a $1 billion finance commitment to clean and renewable energy. CMO Ben Stuart added that the Bank's 1% for the Planet checking account has “tens of thousands of account holders” and is largely responsible for Bank of the West’s total certified giving as a 1% for the Planet member of just over $4.5 million. Fifield noted that about a quarter of new-to-bank checking customers are opening that account.
As this latest report shows, as consumer awareness of their banks’ activities grows, demand for efforts like these are sure to grow with it.