Banking on Green: Bankrolling a Sustainable Future with Finance

May 15, 2024 Gabby Rush

By Gabby Rush

May 15, 2024

Have you ever wondered what happens to your deposited money in a bank? It’s not merely stored away; it’s utilised to lend to other customers or make investments to generate a profit.

However, with the Big Five Banks, your hard-earned money may support activities you disagree with, such as fossil fuel exploitation and deforestation.

In contrast, ethical banks believe profitability should be measured in financial terms, social impact, and environmental sustainability. This approach, known as sustainable or ethical banking, focuses on ensuring profits do not come at the expense of ecological sustainability, social responsibility, or trustworthy corporate governance.

These three pillars are called Environmental, Social, and Governance (ESG).

Many financial institutions embrace sustainability in response to the urgent need for global change. These banks, often called socially responsible banking entities, are revolutionising commercial finance by refusing to invest in or provide loans for activities contributing to climate deterioration, such as the fossil fuel industry [1].

Banking on Green Illustration by Gabby Rush.

The Carbon Bankroll

Organisations and individuals worldwide are diligently working to reduce their environmental footprint. They are adopting measures such as transitioning to renewable energy sources, electrifying their transport, and reducing consumption. However, only a few are realising the potential of one of their most influential tools for creating a positive impact: their banking and investment decisions [2].

Topo Finance, a non-profit organisation based in the US, assists businesses and individuals in leveraging their finances to foster a more regenerative, equitable world. In 2022, they published a report titled The Carbon Bankroll 1.0—The Climate Impact and Untapped Power of Corporate Cash, which disclosed that the emissions caused by financial mismanagement are more significant and widespread than previously reported.

“Since we published ‘Carbon Bankroll 1.0’, a growing wave of companies and institutions have made their financial management a cornerstone of their sustainability work and are driving real impact,” said Topo Executive Director Paul Moinester and Sustainable Finance Initiatives Lead James Vaccaro, who co-wrote both reports. “As organisations start taking action, it will be those banks aligning with climate goals that will be the finance partners for a sustainable future. Whereas those not making the necessary change will see themselves left behind by their customers.” [3].

This year, Topo Finance introduced The Carbon Bankroll 2.0: From Awareness to Action, which builds on the enlightening research from 1.0. and is in partnership with the World Business Council for Sustainable Development, Exponential Roadmap Initiative, Futerra, Pure Strategies, BankFWD, and Climate Safe Lending Network.

Sustainable Banking & Finance in 2024

In June 2023, the first inaugural Conference in Sustainable Banking & Finance (CSBF 2023) was held to contribute to the expanding body of literature on environmental issues related to the operation of financial systems and corporate governance. This conference aimed to gather qualitative and quantitative studies analysing the interaction between global warming, financial institutions, and their relationships with firms and regulators.

Academics from various disciplines were encouraged to offer theoretical contributions and empirical evidence, sharing new insights and pioneering results. The event was organised by Dipartmento di Studi Aziendali e Quantitatvi (DISAQ) of the Università degli studi di Napoli – PARTHENOPE in collaboration with the European Commission – Joint Research Centre (JRC) [4, 5].

This year, the second Conference in Sustainable Banking & Finance (CSBF 2024) will be held in June and aims to explore further and advance the transformative role of sustainable banking and finance in shaping a more resilient and environmentally conscious future.

This conference will stimulate the discussion about the bidirectional nature of the relationship between climate change and finance. Specifically, this conference aims to encourage novel research about the following main but non-exclusive topics:

Financial systems characteristics and carbon emissions across the globe
Estimating the impact of central banks investment on global warming
The impact of climate change on the corporate governance practices
Climate stress test
The impact of climate change on the stability of the global banking system
Global warming and financial institutions
Fintech for climate change
Green bonds and sustainability-linked loans
Climate risks and asset management
Climate risk, financing decisions, firm performance and innovation
The impact of nature-related financial risks on the performance of financial intermediaries and non-financial companies
Biodiversity and finance: the need to measure biodiversity
Measuring climate-related financial risks
Asset and Liability Management (ALM) linked to climate change risk
Understanding Sustainable Finance with Behavioral Insights: Implications for Future Strategies
Climate Finance and Financial Literacy: Exploring Innovative Integration Approaches [6].

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