If you're someone who cares about the environment, you might already be taking steps to reduce your carbon footprint. Maybe you've switched to energy-efficient light bulbs or are more conscious of your water usage. But there's another way you can make a big impact without even changing your daily habits: switching your bank.
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You can download the spreadsheet with the data for this graph at the bottom of this article.
When you put money on your savings account, you might assume that the bank is simply holding onto your cash until you need it again. The truth however, is that your money is being put to work, invested in various projects and companies that the bank hopes will earn them a profit. And as it turns out, where you choose to save your money can have a big impact on the world around you.
Some banks prioritize making as much money as possible, regardless of the impact their investments may have on the environment or society as a whole. Other banks take a more thoughtful approach, carefully choosing where to invest their funds based also on their values and moral standards.
By moving your savings from one bank to another, you're essentially casting a vote for the types of investments you support. This means that by choosing a sustainable bank, you can help support industries that prioritize things like renewable energy and social justice, while avoiding those that contribute to things like climate change or inequality.
So far, is has been difficult to know just how much of an impact your choice of bank can really have. But a recent report has finally given us some concrete data that we can use to better understand the power of our savings.
Before I get to number-crunching, I would like to point out that the impact of switching banks is actually two-fold, and that the real impact of this simple change is much larger than what I’m about to show.
The first impact (and the one I will focus on here) is rather direct. Each dollar invested by a bank has a CO2-footprint. By comparing the CO2-footprint per dollar invested for two different banks, we can calculate the total emissions that we avoid by making the switch.
The second impact is less direct. Investments shape our society, they basically describe what we want to see in the future. Investing in green technologies paves the way for a green society, while investing in fossil-based industries means that we’re keeping things as they were for another 30+ years.
Consider the example of buying a car. Purchasing a regular combustion engine car creates a demand for oil, motivating the industry to invest in things like oil fields, pipelines, and refineries. But opting for an electric car sends a different message. While producing an electric car has an environmental impact, driving it doesn't require new oil reserves. Instead, it requires more efficient charging infrastructure, better ways of generating decentralized energy, and further improvements to efficiency.
Naturally, this impact is impossible to quantify, but should definitely considered in addition to the calculation presented below.
When a bank invests in a company, the emissions of the investment correspond to the emissions of that company. For the data that we will use, three types of emissions are taken into account:
Scope 1 emissions refer to the direct emissions from a company’s own operations, such as the emissions from their own vehicles or their own factories. Scope 2 emissions are the indirect emissions from the production of the energy used by the company, such as the emissions from generating the electricity that powers their buildings or machinery. Scope 3 emissions are the indirect emissions that occur throughout a company’s entire supply chain, such as the emissions from producing the materials used in their products, the emissions from transporting those products, and the emissions from the use and disposal of those products by customers.
Lets consider a green and grey bank. The green bank holds 8.23 million euros worth of investments and the grey bank 69.90 million. By dividing the emissions by these investments by their value, we can calculate the CO2-intensity of each euro invested (kg CO2eq/€).