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0 Responsible Investing and Banking
Earlier this year, the world learned that RBC was the world’s dirtiest bank in 2022, investing more in fossil fuels than any other bank. Canada’s largest bank invested almost CAD 60 billion into the future-ending industry, while the next 4 largest in the country contributed an additional CAD 135 billion. RBC is only increasing its fossil fuel investment, and all of this is coming from a country that has pledged to strive for fewer emissions.
This is simply unacceptable. As the world tries to step away from fossil fuels, it feels as though there is a force pulling us back, and that is the economic might of the industry. They can pay for misleading advertising campaigns, fund climate deniers, and curl their fingers around other industries and countries that rely on them. The only way to get away from our suicidal addiction to oil and gas is to cut the extra money being poured into it. If you take away the money, then you can take away the power. But, governments, including our own, subsidize the industry to the tune of billions of dollars, setting the example for companies and individuals.
The Power of the People
But, there is some good news. If people express their desire to put their money into banks and investments that have better environmental records, banks will be forced to change their practices. On top of that, if the shift is strong enough, then major companies will realize they will lose their investments if they do not shift to greener alternatives. Of course, these are very lofty aspirations, but there is evidence that popular demand for a change in practices has a significant impact on the economy. Look at electric cars, packaging, and the aviation industry.
Electric cars became a part of the fleet because people pushed for them, which forced governments to also support their spread. Packaging has become much more sustainable and major companies have commitments to become even better. The aviation industry emits around 80% of what it did pre-pandemic. All of these are not complete solutions, but it shows that consumer voices do matter.
Responsible Banking
That said, how can people better handle their money to keep it out of fossil fuel giants’ hands? To start, some banks have a better sustainability track record than others. Searching online will give you a plethora of different options, and there are enough to make a good choice for your money. While some may find it nerve-wracking to put their money in a lesser-known bank, many are similarly stable to the larger and better-known banks.
This will become especially true as more and more people start to think about the sustainability of their banking, therefore moving away from fossil fuel investing giants and towards more responsible, often smaller banks. The shift in monetary thinking towards better ESG standards can already be seen in the stock market.
ESG Investing
ESG investing is essentially putting money towards companies that are more responsible. This could be through specific ESG scores, by getting information through the news, or by doing your own research. One may think that this type of investment is more risky or has less return, but this is not the case. The S&P 500 ESG is similar to the regular S&P 500, but only companies that reach a certain standard (determined by S&P) of ESG can qualify.
It, along with many other ESG funds, are actually outperforming the regular S&P 500 this year, because the market is shifting towards ESG companies. Even if you completely take environment out of the picture, ESG investing is still the best option financially. The shift towards ESG is precisely because society is shifting towards more environmental responsibility. As we see this shift happening, better ESG companies will receive more consumer dollars and be favoured by governments. To add, they also show more long-term viability, since they do not rely as heavily on finite resources.
Moving to the Future
So, while Canada’s banking is severely flawed in what it does with its fortune, there is a shift happening. Shifts in other industries show that the consumer and government voice can have a major impact on corporate practices, so responsible banking and investing by individuals is extremely important in shifting away from fossil fuels and other harmful industries. The shift is not happening fast enough, but getting the word out there, as well as leading by example, can be the catalyst to change.
References
CEPF, S. A. (2023, March 14). What are the pros and cons of banking locally? Business Insider. https://www.businessinsider.com/personal-finance/why-bank-local
Chichester, L. (2021, March 29). What is ESG investing? | MoneyLion. Money Lion. https://www.moneylion.com/learn/what-is-esg-investing/
Kim, H., & Teter, J. (2023, July 11). Aviation. IEA. https://www.iea.org/energy-system/transport/aviation
Money Sense. (2023, June 9). Are your deposits at Canadian financial institutions safe? MoneySense. https://www.moneysense.ca/columns/ask-a-planner/are-your-deposits-at-canadian-financial-institutions-safe
Pattee, E. (2021, July 2). The scientists hired by big oil who predicted the climate crisis long ago. The Guardian. https://www.theguardian.com/environment/2021/jul/02/scientists-climate-crisis-big-oil-climate-crimes
PricewaterhouseCoopers. (2021, December 7). Why banks can no longer ignore ESG. PwC. https://www.strategyand.pwc.com/de/en/industries/financial-services/transforming-eu-banks/esg.html
Stewart, K. (2023, February 2). RBC is putting 99% of its energy finance into fossil fuels: Here’s what they should fund instead. Greenpeace Canada. https://www.greenpeace.org/canada/en/story/57198/rbc-is-putting-99-of-its-energy-finance-into-fossil-fuels-heres-what-they-should-fund-instead/
Technia. (2020, June 3). Which Industries Are Leading Sustainable Innovation in 2020? TECHNIA. https://www.technia.com/blog/which-industries-are-leading-sustainable-innovation/
The Canadian Press. (2023, April 13). Royal Bank the No. 1 financier of fossil fuel development in the world, new report finds. CBC. https://www.cbc.ca/news/business/royal-bank-oil-and-gas-1.6809011
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