Scrubbing Emissions From Your Finances

One often overlooked climate-positive move: switch your bank

What is one to do in the face of an existential challenge like climate change? For individuals, some moves are fairly obvious — like swapping out our gas-fueled cars for EVs, public transit or a bike, maybe adding insulation to a leaky house or eating less meat. Less obvious, though, and arguably more impactful, is choosing a climate-friendly bank.

Whether running family finances or a company, it’s easy to forget that our holdings in banks don’t just sit there as if stuffed under a mattress. Collectively our money is used to provide loans for everything from kitchen remodels and business startups to natural gas terminals, new oil pipelines and tar sands development. The latter, well, that’s the problem. 

The good news is that businesses and individuals who don’t want their money to fund the fossil fuel pipeline can opt out and choose from a growing number of banks that purposefully do not include fossil fuels in their portfolios.

Climate-positive finance in slow motion 

In the eight years since the Paris Agreement on climate, 60 major banks continued to pour financing into fossil fuel projects — to the tune of $6.9 trillion globally — according to a 2024 report by a coalition of nonprofits. Topping the “dirty dozen” list are familiar names: JP Morgan Chase, Citigroup, Bank of America, and so on. 

These banks are among the hundreds of financial institutions that joined the Glasgow Financial Alliance for Net Zero (GFANZ) — seen at launch in 2021 as a major commitment by the finance industry to help decarbonize the economy. But follow-through on this and other voluntary initiatives has been underwhelming, according to critics, due in part to the war in Ukraine and a shifting political landscape, with continued new lending even to companies that are expanding their fossil fuel capacity. In the largest such deal of 2023, major banks committed $35 billion in financing to Enbridge to increase methane gas production and build 1,400 miles of new pipeline in the U.S. and Canada.
How much does fossil fuel financing matter? Each $1 billion deployed by a “laggard” U.S. bank generates emissions comparable to 30,000 cars running their internal combustion engines for a year, according to Business Climate Finance, a nonprofit that works with companies to decarbonize their bank accounts and employee retirement plans. Their initiative is starting with the biggest non-financial companies — behemoths like Microsoft, Salesforce, Alphabet/Google and Meta/Facebook — with cash holdings and investments worth more than $1 trillion. If their money shifts, it’s big.

Green shoots in the banking industry

But the reality is that every customer with money in a traditional Main Street bank has some clout. A growing movement to “bank green” is offering guidance for individuals and companies to find out if their current bank is aligned with their concerns about climate (as well as other social issues) and, if not, to find one that is. 

[A note to the understandably confused: To “bank green” is not the same thing as a “green bank.” Green banks are usually publicly funded entities that lend at favorable rates or prioritize lending to climate-friendly projects — like those created under the Biden administration’s Inflation Reduction Act. They typically don’t take deposits. To bank green is a way for retail customers to keep their money with institutions that do not underwrite or lend to environmentally damaging projects.]

Among the groups trying to help steer bank customers away from climate-damaging finance are Bank.Green and its partners. These nonprofits offer a tool that allows you to look up your bank to see how well it scores on the climate front. Be prepared: If you are banking with a typical Main Street/Wall Street bank, it is very likely among the lenders or underwriters of the oil and gas industry. (I plugged in my main bank and my primary credit card holder, and both fell into the bright red frowny-face category.) 

Bank.Green also offers a listing of “sustainable banks” — institutions they rate as “good” or “great” for the planet, which can be filtered by location, services provided, convenience and fees. Within that list are a handful that belong to the Fossil Free Alliance, which means they have vowed to “play no part in the provision of loans, underwriting or investments to aid the expansion of fossil fuel extraction, production or infrastructure — and in the majority of cases, they never have.” 

Another similar resource is Bank for Good, which offers a database of fossil-free financial institutions and credit cards that can be filtered for other social attributes, such as B Corp status and Black or LatinX ownership, as well as by account features, fees, and services. All the listings are FDIC or NCUA insured up to $250,000.

Some of the emerging alternative banks go beyond their vow to not finance fossil fuels with a commitment to finance green projects. The Clean Energy Credit Union based in Colorado, for example, specifically focuses on lending for heat pump installation, solar power, and energy-efficient home retrofitting. Other banks are committed to small business lending, supporting underserved communities and other social goals.

Vote with your wallet, or your voice

As banking has gradually moved from the brick-and-mortar model to online operations, it’s become easier than ever to switch banks because, especially for individual account holders. Many accounts can be opened remotely, and banks provide switch kits that help overcome the practical and psychological barriers. 

For businesses, of course, the hurdles are greater because they are typically using more services and automatic transactions with more stakeholders, and because there are more documentation requirements. Relatively speaking, however, it is a low-cost high-impact way to demonstrate climate commitment, its proponents argue.

“Businesses are constantly having to update their services and infrastructure, and in the case of banking, for SMEs in particular, the transition is typically much smoother than anticipated,” says Zak Gottlieb, executive director of Bank.Green. “The benefit to the planet as well as the additional business value they would be building by showing sustainability leadership should make it worth it.” 

If changing banks is not immediately in the cards, there are other ways for bank customers to weigh in and signal their concern over investment, lending and underwriting for new fossil fuel projects. Bank.Green offers a simple form that you can fill out which sends an automated letter to your bank calling on the institution to defund fossil fuels, and pledging to change banks if they do not. Bank for Good has a copy/paste letter that customers can send to their bank managers urging them to commit to a fossil-free future.

While banks committed to avoiding fossil fuel finance remain a niche in the banking industry, it is now a viable option for businesses and individuals who want their assets to align with their values. By letting your bank manager know that you’re making a decision based on those values, you also add your voice toward a nascent but certain movement toward “clean money.”