Amid recent warnings that global warming is poised to surpass the crucial 1.5C limit for the first time, it is now critical that all businesses - large and small - work towards addressing their collective impact. Carbon assessments have become an indispensable tool for businesses to understand their impact on climate, but the importance of banking as a core emissions driver is frequently overlooked.
Despite many banks having made commitments through initiatives such as Glasgow Financial Alliance for Net Zero (GFANZ) and the Net Zero Banking Alliance (NZBA), efforts are still falling massively short, with the potential power of divestment still remaining largely undiscovered. A recent report by Reclaim Finance revealed that 56 major banks within the Net Zero Banking Alliance have contributed a staggering $270 billion to support the expansion of 102 fossil fuel companies, facilitated through 134 loans and 215 underwriting arrangements. These findings highlight a stark contradiction between the stated commitments of these banks and the reality of their ongoing financial support for the fossil fuel industry. It reinforces the urgent need for greater accountability and more consistent actions aligned with the goal of reducing carbon emissions, essential if we are to mitigate the potentially devastating effects of climate change.
Our businesses play a fundamental role in enabling banks to continue making unsustainable investments. Banks utilise our deposits as a source of funding to finance the fossil fuel industry. When individuals and businesses deposit money into bank accounts, those funds become part of the bank's overall capital. Banks, in turn, use this capital to make loans and investments, including those directed towards the fossil fuel sector - and other high emitting and unsustainable sectors. By leveraging customer deposits, banks effectively channel funds into the fossil fuel and other unsustainable companies, enabling continued growth and development.
While organisations focus on reducing their own direct emissions, they must also recognise the indirect emissions associated with their banking activities. By considering the carbon footprint of their bank, businesses gain a comprehensive understanding of their true environmental impact. This encompasses not only emissions resulting from their operations but also the emissions indirectly financed through their chosen financial institution. Including the bank's impact in carbon assessments provides a more accurate reflection of an organisation's total emissions, enabling informed decision-making and targeted efforts to reduce their carbon footprint holistically. It encourages businesses to select banks that align with their sustainability objectives, thus promoting a shift towards environmentally responsible financing practices.
Recognising that banks play a fundamental role in financing the fossil fuel industry, businesses have a responsibility to assess the indirect emissions associated with their banking activities.
ZeroBees, a specialist sustainability consultancy, offers invaluable support to organizations seeking to understand their full impact, including the environmental consequences of their chosen financial institutions. By partnering with ZeroBees, businesses can gain insights into their carbon footprint that encompass both direct and indirect emissions, enabling organizations to make informed decisionsand implement targeted measures to reduce their overall impact. Together, through a collective commitment to sustainable financing practices, businesses can drive positive change and contribute to a greener, more resilient future.
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