Building a New Green Economy: How Green Banking Can Help You Spend Smarter

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We’re in the midst of an environmental and economic crisis. 

The economy is struggling, and our outdated reliance on fossil fuels is continuing to contribute to climate change. Many people see these problems as separate issues, but they are actually interconnected. 

The harsh effects of climate change constitute a climate emergency that affects all of us, and this guide will explore how green banking can help build a new green economy to combat climate change. 

We’ll discuss how you can use your bank to invest in renewable energy projects and help reduce your carbon footprint. 

We’ll also look at some of the latest trends in green banking, and we’ll consider how you can switch to a more sustainable bank if you’re not already doing so. 

Traditional banking fuels and capitalizes on the climate crisis

Best banking practices are green banking practices.

The Banking on Climate Change report of the Rainforest Action Network (RAN.org) revealed the world’s major banks for financing the climate problem directly. Since 2016, 35 lenders have invested $2.7 trillion into fossil fuel projects. 

Big financial institutions have catastrophically failed to respond to the climate crisis – the climate is being destroyed through fossil fuel finance, and global banks are steadily increasing funding.

Despite being a relatively new concept to the market and consumers, green banking may help the United Nations Framework Convention on Climate Change (UNFCCC) achieve its objectives by financing climate change mitigation and adaptation projects in collaboration with the private sector.

Your banking habits can affect the climate more than you realize.

The links between your personal finances and the climate crisis might not be immediately apparent, but your bank account, pension, and private investments may have direct links to the fossil fuel industry. What’s more, the financial institutions you deal with and entrust your money to may be having a significant impact on the environment.

So, what’s the alternative? Green banking. 

Green banking: An overview

Green banking is “any form of banking from which the country and nation get environmental benefits. A conventional bank becomes a green bank by directing its core operations towards the betterment of the environment.” 

Green banking has become a bit of a buzzword in today’s banking world, but generally refers to the development of inclusive banking strategies that will ensure substantial economic development and promote environmentally-friendly practices. 

Why do we need green banking in 2022?

Green banking is crucial because climate change is accelerating and is now recognized as a global issue that affects all economic sectors – not just the environment. Furthermore, climate-related risks pose physical and transitional challenges to the financial sector. 

To mitigate the adverse effects of climate change, national banks, regulators, and policymakers are implementing various green banking initiatives; however, the approach taken so far varies somewhat between developed and developing countries.

Why should you think about switching from traditional banking to a more environmentally conscious one? The next section will outline some advantages for you, the economy, and your community.

The construction sector can pave the way for a green economic recovery - World Business Council for Sustainable Development (WBCSD)

Green banking reduces our carbon footprint

The primary advantage of the green banking method is that it protects the environment and natural resources while limiting carbon emissions that contribute to global warming. 

The usage of ATMs, mobile banking, internet banking, and other digital financial technologies is a great example of this approach. Electronic transactions not only help to conserve resources but can also save trees by reducing paperwork.

Green financial institutions may:

  • Provide digital banking options
  • Offer paperless correspondence
  • Use renewable energy sources
  • Offer green loans and fossil fund-free investments
  • Demonstrate a commitment to sustainable practices
  • Be transparent about their environmental policies 
  • Partner with reputable partner organizations as a commitment to corporate social responsibility. 

Some green financial institutions may also offer donations to socially responsible projects, or even offer to plant trees on your behalf when you spend with their products. 

Green banking investments are more profitable in the long run

Like any regular bank, a green bank offers financial services, such as loans and deposits. Green banks are unique because they help individuals connect their green banking accounts to other environmentally friendly financial products, like green stocks and investments. 

Green Banks can do what regular banks cannot: make everyday banking decisions based on the impact that specific consumer choices have on the environment.

According to James Gorman, CEO of Morgan Stanley, the transition to environmentally-friendly finance is inevitable. He said: “If we don’t have a planet, we won’t have a great financial system.” 

There is an air of inevitability about the move to sustainable finance. 

Brian Deese, global head of sustainable investing at BlackRock, said, “it was driven by “necessity” as well as “preference.” Mark Carney believes that firms that do not adapt will certainly go bankrupt.

Because every decision is carefully made before investing, these are usually risky investments, and some green technologies have been able to return substantial profits to their investors. Profits made through green investing can rival the profits made through traditional assets.

Green banking furthers economic growth

The influence of finance on an economy is evident in both micro and macroeconomic systems. 

Finance, especially banking and financial businesses, has a major impact on an economy through its involvement in many activities, which in turn affects environmental risk mitigation in the real world.

Banks are responsible for unlocking private investment bridging supply and demand while evaluating projects from both an economic and environmental standpoint during the green economy’s transition.

Green banks in specific states are meant to finance green projects, such as green bonds and green loans.

Green banking also aids in green spending by helping to measure the impact of green investments on a company’s financial health. In essence, green banks can help companies save money while making smarter choices about their green business practices.

In fact, green banks have been shown to increase investment from households into green projects by sevenfold when compared with other types of banks.

Green banking is crucial for governments and businesses because it benefits the environment, saves money, and creates jobs. Green banks allow researchers and leaders in industry sectors to work together towards common environmental goals while promoting sustainable energy initiatives amongst its citizens.

Green banking gives back to the communities

Green banks are purpose-driven firms that utilize cutting-edge financing to speed up their impact. For example, they may use funds to increase resilience or serve low-income communities

They play an essential role in giving everyone — not just those who can afford it — the chance to participate in shifting our economies away from fossil fuels toward green sources of energy like solar and wind power. 

Green banks around the world are using innovative financing to help green businesses, governments, and other mission-driven institutions invest in projects that create green jobs, deliver clean energy, clean up polluted sites, protect species at risk of disappearing forever, increase energy efficiency for homes and companies — and much more.

As green banking continues to develop, green banks will be able to do more to help green businesses, governments, and other mission-driven stakeholders invest in projects that lay the groundwork for a green economy.

Make the shift to green banking today!

Here at Aspiration, we want to share how we can make a positive change together by shifting into green banking now.

Making the switch to the Aspiration Zero credit card is one of the best things you can do for yourself, your community, and the environment. 

Not only does it make good financial sense, but we’ll plant a tree for every purchase you make to help you move towards a carbon-neutral lifestyle.

If you’re interested in learning more about using green banking to create a sustainable way of living, apply today!

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