Big Banks: The greenwash machine is alive and well. We need fintech

As the climate continues to slide off a cliff, the banks are moving in the wrong direction. A ‘fine intervention’ is urgently needed, writes Hannah Duncan.

Image source: Pexels/Marcin Jozwiak

Back in 2018, I wrote my master’s thesis on greenwashing in investment management. It didn’t start out that way.

The research was intended to be about the marketing of sustainable finance. But what I uncovered was so damning, shocking and devastating that it wasn’t just the paper that changed. My whole life turned upside down.

For the first time I saw the truth. Banks’ greenwash. A lot. I was still working in investment management then.

I worked at a major European bank that has spent more than $150 billion on fossil fuel financing since the Paris Agreement.

Like thousands of others, I was unwittingly part of the greenwash machine. I truly believed that my employer was the most sustainable bank in the world. My specialty was writing price reports.

The bank even won an environmental finance award while I was there.

I would write late at night – just me and the office mice – squeezing a win out of every initiative. I even made t-shirts. “WHAT IS YOUR INFLUENCE?” was blazoned over them. And it wasn’t ironic. I jumped out of a plane representing the bank wearing that shirt.

I’m still trying to come to terms with it. I feel like I was a piece in a complicated game. Now I am completely out of the investment bank. I write article after article about greenwashing. But writing only gets you so far. The world needs action.

Short-termism

The OECD has made it painfully clear that we can meet our climate goals if we invest $6.9 billion each year in low-carbon infrastructure. Our cities do not need to be flooded. Our forests do not need to burn.

Nevertheless, the way the banks think is unbearably short-sighted. They love quick and dirty profits. For them, oil is like a bad boyfriend they just can’t leave.

Since the Paris Agreement, 60 banks have handed over $5.469 billion for fossil fuel companies to expand. If they had just said no – or at least attached some conditions – the planet would be in a drastically better position.

Perhaps 33 million Pakistanis would not have been flooded out of their homes. Perhaps 13 million West Africans would not suffer severe starvation from drought. Over the past year, sixteen banks, including my old employer, have increased their funding.

We have more than enough money to do the right thing. 40 billion dollars are invested in Environmental, Social and Governance (ESG) funds. That is four times what is needed. But the money is not invested well.

For example, 10 percent of ESG funds contain BP. Imagine that… Fund managers gathered around a table and agreed that BP was a good company to include. Exxon Mobil and Shell too. Unsurprisingly, BP has now decided to “dial back” on its carbon commitments after years of soaking up our ESG investment. I mean… What did we expect? It’s a petrol company.

The crazy thing is that we have everything we need to save the planet. We know how to create renewable energy; we have the funds to expand… It’s just that the banks won’t hand it over.

They are too deeply involved in fossil fuel companies and maintain the sad status quo.

Break the cycle

Promisingly, there are services fighting to break this swampy, green hellhole. Investment platforms such as The Big Exchange (a sister company of The Big Issue), CIRCA5000 and Triodos unapologetically reject short-termism.

They are laser-focused on sustainability and make it easier for people to invest in green infrastructure. The Big Exchange, for example, has a button that I love. It’s called “filter for fossil free”, and with one click not a penny of my money goes to oil companies.

Perhaps most importantly – to avoid greenwash – they are transparent. Some are powered by another fintech, Tumelo. It’s a platform that uses review voting technology to give ordinary people a say in their own investments.

Of course the weird anti-woke lobbies in the US hate this sort of thing. The big banks hate it too. They are vehemently protesting the INDEX Act. If they succeed, it will be a major roadblock to people like you and me having a say in our investments. Being able to choose where our money goes should be a right. But it is becoming a privilege.

(Sidenote: Did you know that woke means to be “aware of racial and social issues”? … I have a theory that people who describe themselves as “anti-woke” didn’t research the definition).

Other fintechs approach the problem from a different angle. Recently I spoke with another investment management survivor, Mais Callan.

She has created a Software-as-a-Service platform for institutional investors such as pension funds to share data and increase sustainability. It is an incredibly ambitious goal. But if her platform – Impactive – goes mainstream, £2.5tn managed by UK pension funds could (finally) be used to save the planet.

Green and sustainable fintech like this is just a drop in the toxic investment sea. They need urgent support and capital to gain momentum.

But frustratingly, many struggle to get funding. I wonder how much of this is because they are often founded by women. Despite creating 40 per cent of fintech start-ups, women-led start-ups receive only 4 per cent of UK VC funding.

Tear off the green colored glasses

When another Earth Day (my birthday) passes, we must force ourselves to recognize the mistakes we have made. The painful, humiliating and agonizing mistakes. It is difficult. Really difficult. But we have to.

Greenwash is scary because you really don’t see it while you’re doing it. I was deep into making greenwash and I had no idea. My desk couldn’t be closer to the energy traders. Hundreds of monitors screamed oil prices at me every day. But I was totally ignorant.

The vast majority who work at banks like JPMorgan ($434.1 billion in fossil fuels since 2016), CITI ($332.9 billion) or Wells Fargo ($318.2 billion) probably have no idea either.

If you’re someone who creates ESG marketing materials for some of the banks that finance fossil fuels (like I was), I’m sorry to say it, but you ARE part of the problem.

That is why we need new financial services. New faces. New thinking.

Time is running out. As the IPCC puts it, there is “a rapidly closing window of opportunity to ensure a livable and sustainable future”.

We need an economic intervention. A “fine intervention”.

It’s time to move over.

The views and opinions expressed are not necessarily AltFi’s.