Big banks are the lifeline of the fossil fuel industry. It’s estimated that since the Paris Agreement went into force in 2016, banks across the planet have loaned $1.6 trillion to companies developing oil, gas, and coal projects. That’s an insane amount of money being invested into an industry that’s leading to our demise. What’s even more disappointing is the fact that the top 4 banks with the most fossil fuel investments are all American, which include JPMorgan Chase & Co., Wells Fargo, Bank of America, and Citibank Inc. As more people become aware of these activities, a movement to divest money from these banks has gained traction. Aspiration has been leading this change since 2013, and we have no plans to stop. Our neobank believes that divesting from fossil fuels is the best way to curb the expansion of fossil fuels, and reduce carbon dioxide levels in the atmosphere. We’ve put together a guide on how to divest your money if your environmental values no longer align with the interests of your bank.
How do banks fund fossil fuel interests?
Banks support the fossil fuel industry by directly financing extraction companies or establishing their own independent companies that engage in fossil fuel extraction. For example, JPMorgan Chase, considered by many experts to be the world’s largest financier of fossil fuels, invests in companies that are aggressively expanding their fracking operations. Until recently, it was directly funding new coal fire plants and oil drilling projects in the protected Arctic National Wildlife Refuge. And in 2020, when the global pandemic caused oil prices to drop, many big banks rushed to set up independent companies to take over shale extraction infrastructure left behind by oil companies going bankrupt. Banks see fossil fuels as one of the most profitable industries on the planet. For decades they have bankrolled oil companies because of a short-sighted view of quick profits. But increased public criticism is beginning to highlight their destructive impact, which if not restricted soon, will cause widespread environmental damage.
What effect does that have on the environment?
When banks fund fossil fuel projects, it creates an endless cycle that leads to every environmentally conscious person’s nightmare: an increase in greenhouse gas emissions that will fuel more natural disasters around the world. Fossil fuels like coal, natural gas, and crude oil lie deep underneath the Earth’s surface. They have to be extracted using special equipment and infrastructure that destroys the environment. Starting with extraction, oil companies have to build refineries and large drills on forested land or along the ocean. In some places, forests have to be cleared away, disturbing natural habitats and causing widespread deforestation. Fracking, the process of drilling horizontally into shale gas deposits, releases methane that rapidly heats up the climate.
When transporting the fossil fuels from their source to refineries and depots, accidents can happen like the Exxon Valdez oil spill in 1989 or the numerous oil pipeline incidents. They leaked so much oil out into the ocean and rivers that killed millions of animals and bankrupted fishermen. And once fossil fuels reach our cities and towns, they get put into our cars and trains to help us get from place to place. They also get used to run power plants that supply electricity and heating to our homes. These all contribute to greenhouse gas emissions that collect in our atmosphere and warm the climate. We’re already seeing a cycle of wildfires, melting polar ice caps, and loss of wildlife that’s caused by the increase in greenhouse gas emissions.
What can you do as a customer?
As a banking customer, you can take clear and concrete steps to limit the fossil fuel industry. You can take back control of your money and prevent it from being used to fund oil companies without your consent. Two of the most powerful ways of standing up against unsolicited fossil fuel investments by your bank are to support divestment movements and divest from your old bank.
Support divestment movements
Inspired by the Boycott, Divestment, and Sanctions (BDS) campaign against apartheid South Africa, the increasingly popular fossil fuel divestment movement has helped many institutions and individuals cut off their support for fossil fuel funded investments.
It operates on the fundamental idea that if your money and assets are not invested in Big Banks and oil companies, you limit the funding that goes into the operation of the fossil fuel infrastructure. Global organizations such as 350.org and indigenous American grassroots organizations are currently leading this movement. They call for governments and the United Nations to hold banks accountable for climate change caused by fossil fuels.
You can support these movements by signing up as a member or a donor. By working collectively with other like-minded ‘divestors’, you can pressure for change to come from the top.
Divest from your bank
One step up from supporting a divestment movement is to divest your money from your current bank that could be funding oil companies. Big Banks rely on your money to use as loans for fossil fuel companies, so moving your money to a more ethical lender sends your bank a signal that its customers are dissatisfied with its investments. And if many people begin divesting their money out of Big Banks, change becomes inevitable. Since the early 2010s, many public institutions and charitable foundations have moved their money out of coal, oil, and gas stocks, bonds, and funds. This has snowballed into a collective effort to hold global banks accountable for their involvement in the climate crisis.
Can you divest from your old bank?
Yes. Divesting from your old bank is a simple process that anyone can do. In fact, the United Nations has even lent its ‘moral authority’ to the divestment movement to ensure that the goals of the 2016 Paris Agreement can be met. As bank customers, we are entitled to receiving the best service that banks can offer to us. This service not only includes basic products such as savings accounts with interest rates, but also a company mission that’s aligned with our values. If a bank’s service no longer meets our requirements, we have no obligation to continue being a customer with that bank. Banks are businesses, and we have the right to switch to better services that ethically manage our money.
In the case of fossil fuel banks, keeping our money with them makes us complicit in their destruction of the climate. We become unknowing supporters of deforestation, oil spills, and human rights abuses. Divesting from your old bank can be done with just a few steps, starting with looking for a bank that doesn’t invest any of its customers’ money into the fossil fuel industry.
What banks are divesting from fossil fuels?
Thanks to public pressure, many big banks are divesting from fossil fuels. The European Investment Bank, which is the world’s largest public bank, announced in late 2019 that it would stop funding most of its coal and oil projects by 2021. It pledged to become the world’s first ‘climate bank’ that focuses on policies that will prevent catastrophic climate change. Environmental activists had been lobbying for this change for years, but the climate change protests in late 2019, plus the goals of the Paris Agreement, have helped accelerate this divestment policy.
The conversation around climate change has become so forceful that it may be influencing the world’s top fossil fuel banks to introduce policies to curb their involvement in coal, oil, and gas. Blackrock, the world’s largest investment bank with a history of ignoring climate change, started in mid-2020 to divest from companies making more than 25% of their revenue from thermal coal. Some analysts have welcomed this move to align with the Paris Agreement, but are wary that the decision was based more on profits than concern for the climate. JPMorgan Chase announced in early 2020 that it would suspend its financing of loans to oil and gas drilling projects in the Arctic. It has also pledged to reduce its loans to some coal firms. Wells Fargo, under mounting pressure from shareholders, has invested more than $12 billion in sustainable businesses and committed a further $200 billion to projects that will help the US transition to a low-carbon economy by 2030. Despite these positive developments, the rate of divestment is still not enough to halt climate change. Many banks continue to pour billions of dollars into fossil fuel projects when the world is already at risk of exceeding its carbon budget. It’s a marked difference from eco-conscious banks like Aspiration that have not invested a single dollar in oil companies since their foundation. Some activists and environmental experts are concerned that while banks may pledge to limit their fossil fuel funding, they may become complacent if not enough pressure is applied consistently.
How to divest from a bank that funds fossil fuels
That’s why divesting from your bank that’s funding fossil fuels is one of the most effective climate action decisions you can take. It tells them that you are dissatisfied with their ethics. You can begin to divest from your bank by calling them to ask for a transparent overview of their investments in fossil fuel infrastructure. This information will help you understand your bank’s relationship with the fossil fuel industry as well as any initiatives they may have taken to invest in renewable energies. Do note though that most Big Banks do not have policies that oblige them to share this information. If your bank will not let you know its fossil fuel investment portfolio, the Banking on Climate Change report compiled by a consortium of environmental groups contains detailed breakdowns of the fossil fuel activities of different banks. In addition to your personal savings account, your pension fund or your investment portfolio may also be investing money in oil extraction companies. Make sure to check for this as well to get a full understanding of how your money might be getting reinvested. Once you know your bank’s environmental record, it’s time to start shopping for mission-driven, ethically minded banks that are aligned with your values. Credit unions, community development financial institutions, and banks that are certified B corporations are great alternatives to move your money to. Find one that offers the banking services you require plus the explicit commitment that it does not invest its customers’ money into fossil fuels. The most ethical banks are the ones that publish a transparent review of their investment portfolios and climate action initiatives. When you’ve found the sustainable bank of your choice, call your bank and tell them that you are divesting to another bank that matches your climate values. Follow through with the account closure process and transfer your money to your new eco-friendly bank.
Find a new, eco-friendly bank
Aspiration is a financial services company that is trusted by millions of eco-conscious consumers. We turn every transaction you make into a positive climate action by planting trees and offsetting your carbon emissions. We don’t use any of our customers’ deposits to fund fossil fuel projects like oil pipelines and coal mines. Opening an account with us is easy – we operate by a ‘pay what is fair’ policy’, meaning that you get to choose how much you want to pay to save with us. Check our products today to learn more about how you can bank to save the planet.