Big banks are financing the fossil fuel industry – and it’s time consumers know it’s with their money

Between 2016 and 2020, 60% of the largest commercial banks in the world collectively put $3.8 trillion in the fossil fuel industry, according to the report Banking On Climate Chaos. The top 4 contributors are American industry giants JPMorgan Chase, Citi, Wells Fargo, and Bank of America. The figure below illustrates the amount contributed by the top 12 banks, categorized by country and amount of financing.

Where does the money come from?

It isn’t always known to consumers that the cash in their checking and savings account is used by banks to give out loans. Mobile banking platform Ando Money believes in only allowing environment-friendly lending through its platform. Last week, at Tearsheet’s inaugural Banking on the Planet conference, the firm's CEO and co-founder JP McNeill elaborated that currently $18 trillion is sitting in savings and checking accounts, and can be used by banks to finance “all sorts of things” including those that make climate change worse.

Whenever banks are not using their customers’ deposits to make loans, they instead borrow money from the federal government or other banks. In Ando Money’s case, the firm has partnered up with various banks, to whom it directs its customers' deposits. These banks are contractually obligated to ensure that these funds are only allocated to green loans.

Green loans mean money is borrowed for purposes that are environmentally friendly, for example building infrastructure that utilizes renewable sources of energy or funding needed by low-carbon businesses. At the moment, Ando Money has 100,000 members, a third of which were gained by referrals from existing customers. 

Protecting communities with community banks

Among American banks, many are smaller organizations and credit unions or community banks. Ando Money allows these organizations to offer their customers a place to put their money which won't later use their funds to pump carbon into the atmosphere.

McNeil thinks there is a pressing need for the banking industry to slam the brakes on its fossil fuel financing. Mere greenwashing is “insufficient” to combat climate change, and if industry giants want to respond to the rising temperatures, they will have to begin with transparency. This means informing consumers about what their money is used to finance, whether it's in the form of pie charts or stories about the bank’s activities and partners. To strengthen the sustainability models, “guardrails” should be put in place to ensure that organizations that claim to be sustainable are only funding low-carbon business and low-carbon loans.

Ando Money uses the model described above to report its financing choices back to its customers. Since the current banking system is so deeply enmeshed in consumers’ lives and habits, creating awareness on the issue can be met with a lot of inertia. However, the firm is planning to meet this challenge by partnering up with influencers that are passionate about climate change to raise awareness around what it means to be a sustainable bank.

By offering this alternative way of banking, the firm says it provides consumers a chance to vote with their wallet. McNeil says, “the onus is on individuals to realize that they have a choice and they can start to participate with banks that are being transparent. Once banks see that sustainable banks are growing fast, it's attracting lots of customers. Then the bank is going to think we should do this. Ultimately, they're only going to respond if consumers want it. Consumers need to take one of the first steps. “

To enable these steps, Ando Money will continue to partner up with community banks to help them improve their green loan programs and push for greater transparency and guardrails in the macro environment.