How to make your finances more sustainable
There’s a strange phenomenon that happens when it comes to sustainability. It’s called the ‘action-intention gap’ — we want to make better choices for the environment, but we often don’t know the steps required to make it happen. Making a few simple changes to your finances are a great place to start.
Greenly, a fintech that tracks the carbon emissions of business purchases, estimates that Europeans have an average carbon footprint of 15 tonnes of CO2 per year. To reach the UN’s carbon-zero goal, that needs to be slashed by almost 33% by the end of 2050.
Making better decisions about where we bank, invest and spend our money can have a profound effect on that journey. Here are some of our tips on how you can make your business, and personal finances, more environmentally friendly.
Embrace open banking
Open banking is the process of allowing third-party platforms access to your transaction data through the use of APIs. This function is now available through the majority of UK banks, but requires individual customers to consent to their information being used in this way.
There are a number of use cases in the market that are making a tangible difference to customer behaviour.
For example, Natwest has implemented a carbon tracker for retail customers, that uses location data to further suggest alternative purchases. A trial rollout found that users were cutting their footprint by 11kg per month, and many reported making more sustainable decisions such as eating less meat, using more public transport, composting and switching energy providers.
Greenly’s app uses accounting and banking data to track the environmental impact of a business across the entirety of their output, and all the way down their supply chains.
Better understanding of your financial data is a vital resource for a number of reasons. Open banking can prompt you to save more, and earmark areas where you can cut back, creating sustainability for your wallet, and the world at large. A win-win if we’ve ever seen one.
Spot the greenwashers
Where you spend your money can have a profound impact on your carbon footprint. As consumers, we broadly have good intentions. A study by EY found that 84% of shoppers consider sustainability before they part ways with their hard-earned cash. However, we can clearly see there’s a gap in intention versus action, as just 18% of shoppers consider themselves ‘planet-first’ when they make a purchase.
There are brands out there that are willing to exploit that gap. This is commonly known as ‘green-washing’, essentially the act of an organisation appearing more environmentally friendly than they actually are.
For example, H&M were found to be inaccurately reporting or inflating their sustainability figures to customers. How can you spot the bonafide from the fakers?
Certifications are a good place to start. Fair Trade logos on your grocery shop, or the FSC logo on magazines or marketing materials are usually signifiers that a company has taken the necessary steps to mitigate their impact. This list of 15 sustainable certifications on a variety of products is a great place to start.
Is your bank funding fossil fuels?
In a further example of greenwashing, a number of banks are still heavily investing in fossil fuels, dispute signing up to sustainability pledges.
Following COP26 the Glasgow Financial Alliance for Net Zero (GFANZ) initiative was formed. Some 450 organisations with over $130trn of assets agreed to align their investments to the UN’s goal of limiting global heating to 1.5 degrees celsius by 2050. However, a study by Reclaim Finance found that those banks have invested as much as $270bn to fossil fuel companies in the intervening period.
There is often a disconnect between the money we have in the bank, and what the bank uses our capital to do. Make no mistake, that is your money that is being used to fund damaging businesses.
So what can you do? Tools such as Bank.green are a quick way to get the headlines on your bank’s practices. It also suggests other institutions that have either divested their fossil fuel investments or use their money to fund greener projects.
Invest in green funds and companies, for a better future
Investing your money in stocks and shares, and saving for your retirement through a pension fund are a great way of supercharging your personal finances. However, this is again an instance where your money could be used to fund companies that don’t align with your sustainability efforts.
A number of large pension funds scaled back investment into fossil fuels in the past few years, but it’s worth checking if your provider of your company pension, or your personal fund, has yet to divest.
Consult with your personal financial advisor to find the right blend of investments that prioritise the growth of sustainable energy sources or climate tech.
If you hold shares in a company directly, make your voice heard. Write to the board, attend shareholder meetings and demand more visibility and action on the company’s ESG efforts.
Work with sustainable suppliers
Your business is a node in the economy. It interacts with other companies, consumers and investors within that ‘economic ecosystem’. To enact the change you want to see in the fight against climate change, working with other businesses that share your goals is crucial. It creates networks of like-minded people, funds new innovations, and changes behaviours at every level of the business.
The B Corp movement for example, has exacting standards for their organisations around their environmental impact and reporting, and is a clear identifier of companies that are in this for the right reasons.
At Pennyhills, we strongly believe that better financial management will be the primary motivating factor in our fight against climate change. Accountants know where the money comes, and where it goes. We see the supply chain as a whole.
We’re committed to helping our clients make better decisions for themselves, their clients, and ultimately the planet. If you’d like to find out more about our commitment to sustainability, and how we can help you on your journey, get in touch.