If you’re looking to adopt more sustainable and environmentally-friendly processes into your life, look no further than the eco-friendly ESG credit card. ESG stands for Environmental Social and Governance. This type of financial implementation can fund a better future for the planet and subsequent generations.
According to the Thales Group, the amount of plastic implemented in developing credit cards annually is the same as the weight of 150 Boeing 747s airplanes. That’s a hefty chunk. The carbon footprint of banking cards is enormous and the need for eco-friendly credit cards is more important now than ever.
Want an eco-friendly credit card? If so, then be sure to check the ESG score of multiple credit card companies before making your final decision.
What is an “Eco-friendly credit card”?
To create an eco-friendly credit card, banks and credit unions will need to strategize by choosing the correct technology, products, and methods for producing an ESG credit card that greatly reduces adverse environmental impacts.
There are various ways that a credit card could be eco-friendly. For instance, the BNP Paribas’ Bank of the West has a biodegradable card linked to a climate-action checking account. It includes a carbon-tracking tool to discover if a store is sustainable, according to Bloomberg.
Furthermore, in 2020, MasterCard along with another 60 financial establishments began issuing credit cards produced from ocean-harvested, biodegradable, or recyclable plastic.
“There are a lot of people who are thinking about sustainability and ethics when they make daily decisions about the clothes or protein they want to buy, the coffee they drink or their car,” Andrei Cherny, chief executive of Aspiration Bank, told Bloomberg. “But then don’t realize their bank credit card and deposits are having a much worse impact on the planet.”
As such, an eco-friendly ESG credit card can help you take your protection of the planet up a notch.
Cards Issued from Eco-Friendly Institutions
Several eco-friendly institutions issue credit cards including:
- BNP Paribas’ Bank of the West
- TCM Bank, which is a division of the Independent Community Bankers of America
BNP Paribas’ Bank of the West declines to add financing toward fracking and natural gas drilling. In addition, they partner with Doconomy to assist consumers by investigating and decreasing their carbon footprint.
Doconomy provides a credit card that will prevent customers from buying any more products once they hit their carbon dioxide emissions target. Doconomy also emphasizes gender and racial equality, with 50% of their board being female, and a woman of color serving as their CEO.
TCM Bank also offers the Green America Visa card. With this card, a percentage of your spend will be used to support clean energy, eco-friendly businesses, fair trade, and a prohibition on genetically modified organisms (GMOs).
An eco-friendly credit card is also usually attributed to carbon offsets. Due to carbon offsets, you can assist in financing an environmentally-friendly assignment, which has the goal of reducing your carbon footprint.
Carbon offsetting credit cards have become more popular in recent years, as financial institutions have begun to implement more environmentally-friendly principles. Credit card companies with carbon offsetting values usually partner with third parties that follow reforestation pursuits and other methods for reducing a carbon footprint.
When choosing an ESG credit card with carbon offsets, check out the organizations that the credit card company partners with so that it is clear how much of an eco-friendly benefit your purchases could have. Reducing your carbon footprint also involves avoiding buying too many products, so also try and use that credit card responsibly.
Donations and charity contributions
Along with carbon offsetting credit cards, there are also ESG credit cards associated with donations and contributions to charity. Environmental organizations all over the world need funding to ensure they can continue doing good work in terms of protecting the planet.
Eco-friendly credit cards can send donations to such nonprofit environmental organizations. Anytime you need to make a purchase, a donation would go toward environmental foundations.
However, purchasing too many consumer products could also negatively impact the planet, which means more care needs to be made when choosing to use an eco-friendly credit card.
Furthermore, it may be beneficial to donate your credit card rewards to nonprofit environmental charities to avoid processing fees and ensure 100 percent of your donation actually goes to the charity. Hotel programs and frequent flyer programs often have systems for donating your cash back or points toward a nonprofit environmental organization.
Understanding ESG ratings
Environmental, Social, and Governance (ESG) ratings look at the credit quality of a card including the ability and inclination of borrowers to pay back funds. Therefore, ESG ratings have a major part in overall credit ratings and the credit of a borrower.
The ESG Evaluation is useful for investors in forming an evaluation of preparedness for taking ESG risks and opportunities. In addition, the ESG profile looks at a credit card company’s activities and incorporates outputs to analyze the regional footprint of the credit card entity. The analysis also looks at how much the company has lessened risks.
Essentially, ESG ratings show how a company is scored based on a variety of factors:
- Shareholder reports
- Sustainability standards
- Carbon disclosure data
- Flood risk analysis
- Water scarcity data
- Sustainability reports
- Climate-related financial outcomes
- And more
What are ESG ratings?
Most companies worldwide are assessed and rated based on their Environmental, Social, and Governance (ESG) procedures and outcomes via the ratings of third-party organizations, as reported by the Harvard Law School Forum on Corporate Governance.
Multiple third parties assess ESG ratings worldwide. For example, Bloomberg assesses companies annually by looking at corporate social responsibility and sustainability records. Bloomberg looks at various aspects in terms of ESG ratings, such as carbon emissions, renewables, the supply chain, waste discarding, diversity, and human rights.
The DowJones Sustainability Index also performs an ESG analysis and has been doing so since 1999. The factors that DowJones look at include:
- Environmental reports
- Operational eco-efficiency
- Environmental policies and management practices
- Corporate governance
- Brand management
- Business conduct ratings
How do ESG ratings apply to credit cards?
ESG ratings of banks, credit unions, and credit card companies all provide data on how eco-friendly a credit card is for those who are interested in protecting the planet via their purchases. Essentially, ESG ratings may help to show which banks are ethical and reliable in terms of implementing environmentally-friendly policies.
Credit unions and small local banks are often more eco-friendly and ethical in many of their policies. Along with ESG ratings, three certifications also show how ethical a bank or credit card company is. These three certifications are called B-corps, The Global Alliance for Banking on Values (GABV), and Community Development Financial Institutions (CDFI).
B-corps certification ensures greater transparency, accountability, and general ethics of rated banks. GABV certification is based on sustainability and environmental development, while CDFI certifications look at how well companies help economically grieved communities.
Using ESG ratings when buying a credit card
When choosing an ESG credit card, it may be helpful to first look at socially accountable and sustainable banks that provide credit cards. ESG ratings apply to large consumer banks, such as Wells Fargo or Bank of America, as well as Capital One and smaller banking institutions.
By mostly focusing on the ESG scores of banking institutions, you may be able to streamline the process of choosing a credit card. Focusing on different eco-friendly programs may not provide you with the best choice if the bank itself is not very environmentally friendly or ethical. As such, take a look at the different ESG ratings of each bank when choosing a credit card.
Best eco-friendly credit cards
The Green America Visa: This credit card supports green economy programs such as developing fair trading platforms, boosting clean energy solutions, and removing genetically modified organisms (GMOs) from the food chain.
The Clean Water Card: With this credit card, you can support the provision of clean water to communities in need, helping to improve the health of children and families. This Visa Platinum card is aimed at those who support the Clean Water Action organization.
Aspiration Zero: The Aspiration Zero credit card aims to help you to go carbon neutral. With every swipe of the card, the organization plants a tree on your behalf and gives you the chance to round up your purchase to plant an additional tree as well.
For every month that a cardholder reaches a carbon footprint of zero, you will receive cash back of up to 1 percent on purchases. For those of you who want the most eco-friendly option and love the idea of planting trees, Aspiration Zero may be a great option.
To check out the Aspiration Zero, or to read more about their other green financing solutions, check out their site today.