Econ-Dit

Words by Aryaman Mehta, Sustainable Finance Project

Despite the fact our awareness of sustainability has been substantially increasing over the years, global warming and climate change still unanimously remain the biggest issues that humanity faces today; the aftermath of which poses a threat to food systems, ecosystems, and the sustenance of effectively all life on Earth. As this crisis deepens, it is extremely vital and imminent that we look to create a more sustainable future, one which would require an all-hands-on deck approach from most industries, finance being a key player among them.

The finance sector plays an extremely crucial role in raising alertness around issues pertaining to the field of sustainability. This can be in the form of raising money for, and funding the research and development of sustainable alternatives, or by supporting businesses with sustainable practices. Further, financially investing in those who act ethically in their social inclusions, and fair labour practices or equally, by divesting one’s funds from fossil fuel companies and coal, could make a big difference. In 2012, when the first institutions in the United States publicly committed to divesting from fossil fuels, the idea may have come across as blasphemous and audacious, as divorcing fossil fuels would require society and the ruthless financial institutions to stand abreast. Ten years down the line, this idea of divestment has gained immense popularity and traction, spreading way beyond university endowment funds, and enormous super and pension funds. However, taking sustainable factors into account at a macro-level is just not enough. We can revolutionise the way we approach a sustainable form of life, by an act as simple as students, like yourself, taking environmental factors into account when creating your budget and managing your finances. Even if you are a student who isn’t fully prepared to embrace sustainable alternatives and practices in your life, making small financial changes will play an indispensable role in ensuring that the planet does not end up a smouldering cinder. Whether you are a financially stable individual, or a student living on a budget, taking a green approach towards your personal finances, will ensure that your money isn’t used in a manner that goes against our environmental interests, and will almost certainly offer better financial outcomes for you.

Changing to an environmentally conscious bank Switching banks may be an extremely tedious task; a hassle that not everyone is willing to go through, however, in many cases individuals simply add a bank when they want a new service and end up banking with more than one institution. So, if you are looking to add a new bank or leave your existing one, it is prudent to take the ESG (Environmental, Social and Governance) factors into account before making important financial decisions. This can mean checking if the banks were created for a particular mission, or auditing their records to ensure that they have no recent history of funding fossil fuels. (Market Forces has a concise list of the banks that have no record of funding fossil fuels since

2016).

Commercial banks use your deposits to lend money to other customers / consumers, for which they charge a certain fee from these consumers, and you do not get to choose how your specific funds are used or who they are loaned to. In the case of sustainabilityoriented banks, your deposits are used for financing or refinancing those projects that positively contribute to the environment or addressing climate change, and therefore you as a consumer are assured that your funds are doing their part in supporting a brighter and more sustainable future.

A few banks and financial institutions also offer the option of socially responsible credit cards. Unlike the standard points that you earn from normal credit cards, green cards can potentially benefit the environment. With credit cards, like ‘Sustain: The Green Mastercard’, you can convert your points into carbon offsets that can be used to fund environmental initiatives such as rainforest preservation.

In many cases, you might find that going local is the best route. This can be in the form of a credit union or a local bank, because these are often built for communities, with all the money being deposited back into these communities.

Apart from this, acts such as changing your preferred superannuation fund to an ethical one, shopping socially smart or limiting discretionary purchases to set aside funds for purchasing energy efficient, sustainable appliances, may help us take small, but crucial steps towards a sustainable future. This can be done by evaluating the firm’s you are interested in, what they stand for as a company, what their ‘green priorities’ are and how the fund does or does not contribute to carbon emissions. Sustainable investing can almost certainly guarantee better financial outcomes, with a report by asset management firm BlackRock stating that 8 out of 10 portfolios which were based on ESG criteria, performed better than those that weren’t.

The real impact kicks in when you funnel your investing dollars into environmentally conscious companies. Whether you call it impact investing or ESG investing, there are now more avenues for putting your funds, where your values are.