Your money is a weapon. It can either be used to tackle the climate crisis or fan the flames. The United Nations’ climate conference in Glasgow, COP26, says it is time to have a serious discussion about how our money can be deployed to save the world.
On the second evening of COP26’s ‘World Leaders Summit’, Finextra attended a screening of WWF’s new film, “Our Planet: Too Big To Fail”. The picture explored the risks of inaction, the impact of investing-as-usual, and the role the finance sector can play powering a sustainable future. Prior to the film, a panel discussion - comprised of representatives from Make My Money Matter, Triodos, Aviva, Scottish Widows, and of course WWF - examined how our banks, savings accounts, and pensions can, with the help of fintech, help save the planet.
The pension problem
Do you know who manages your pension? Do you know the top ten holdings in your pension? Do you know the overall positive or negative impact of these investments?
In today’s COP26 session, ‘How your wallet could change the world’, campaign director of Make My Money Matter, David Hayman, revealed that having a green pension is 21x more effective at cutting our carbon footprints than stopping flying, going vegetarian and switching energy provider, combined. This is because much of the UK’s £2.6 trillion of pensions - and $50 trillion worldwide - is being invested in fossil fuels, tobacco, and other dirty industries. These investments contradict the values of any environmentally conscientious person.
“We released a report last week,” said Hayman, “that showed our pensions are responsible for enabling 330 million tonnes of carbon emissions every year. To put that into context, that's more than the UK’s total CO2 output.” If our if our pensions industry was a country, it would be in the top 20 global emitters.
But don’t submit to doomism, urged Simon Mundy, Financial Times’ Moral Money editor, and host of the discussion. There is plenty that can be done to address this issue - especially when responsible pension providers and fintech solutions join forces.
Fintech-powered pensions
Life insurance and pensions company, Scottish Widows, is one such provider that is taking the impact of its holdings seriously. In 2020, it announced that it would be dumping £440m of company holdings that fail ESG tests.
The next step in its sustainable journey has been unveiled just today - with the launch of a two-way fintech communication dashboard that enables customers to view and manage how their pension is being invested.
Other insurance firms are following suit in the fight to save the world with our wallets. Leading online pension provider, PensionBee, for instance, has reduced its exposure to environmentally unfriendly companies, and is investing in over 3,000 firms globally that are screened against a set of Environmental, Social and Governance (ESG) criteria.
"PensionBee is committed to transparency and high standards of corporate governance,” notes Romi Savova, CEO of PensionBee.
As part of this commitment, the online pension provider recently launched a ‘Fossil Fuel Free’ plan - the UK’s first mainstream private pension plan to exclude companies with reserves in oil, gas or coal. It also excludes tobacco companies, manufacturers of weapons, nuclear weapons and violators of the UN Global Compact.
Switching the game up
Looking beyond, but not excluding, pensions is SwitchIt - an online fintech tool, funded by Climate 2025, which enables consumers to discover whether their banks and energy providers are harming the planet.
“Since 2016, 35 banks have invested $2.7tn in fossil fuels. That’s $2,700,000,000,000 to continue to destroy our natural world,” says the firm.
When it comes to assessing energy providers, the online SwitchIt tool gives each a rank based upon their usage of renewable energy - ranging from “terrible” to “great”. The information used to reach this score is derived from 2019 data from electricityinfo.org. Recommended companies are those who generate their own renewable energy, such as Ecotricity, Good Energy and Octopus Energy.
The banking recommendations, meanwhile, use report data provided by the likes of Rainforest Action Network, BankTrack, Sierra Club, OilChange, Indigenous Environmental Network, and Honor the Earth (Banking on Climate Change).
If users of the tool are unhappy with how their wallet is being used, they are given a choice to see alternatives - and switch.
“Our entire financial system needs to change,” says SwitchIt. “We work with our partners to get impartial, independent information on how money is being deployed across pensions, savings, insurance, and more.”
Systems won’t change if we aren’t engaged
Debates at COP26’s Finance Day have circled around one central theme - our current capitalist model has failed to preserve the planet on which we live. As such, we need to move to a stakeholder capitalism model, where all those impacted by an entity’s actions are considered in decisions.
This systemic change is, of course, a monumental undertaking - and one that will only happen if the demand for a cultural shift exists, and the financial technology is there to inform it. Indeed, it is our responsibility, as consumers, to ask questions of our financial institutions, and influence how our cash is being deployed. Even regulatory changes, pointed out Mundy, do not happen without widespread demand.
We should vote, as well as buy, with our wallets.