Sustainable Banking - Your Personal Impact

Have you ever wondered what happens to your money after you deposit it in a bank? Of course, it doesn't just "sleep" on your account. All banks put your money to work to make more money for themselves. Unfortunately, the big commercial banks often direct your money in ways that have become a big problem for people and the planet. This often means that invested money supports fossil fuels, destroys habitats or harms communities, something that very few investors take into account. But how can you actually measure the impact of your sustainable current account?

At first glance, the term "sustainable banking" may seem diverse and elusive. In fact, there are different terms that appear in the context of this idea, including, for example, "Social Banking", "Ethical Banking" or "Green Banking". These terms basically refer to the same thing: banks that go beyond financial gain and focus on fairness, ethics, and ecology.

In Germany, cooperative banks have been the forerunners of social banks since the middle of the 19th century. The oldest sustainable banks are the German GLS Bank, founded in 1974, and the Dutch Triodos Bank, founded in 1980.

The operations of sustainable banks are similar in principle to those of traditional banks, including current accounts and investment banking. But the crucial difference lies in their commitment to achieve a socio-ecological "win for people and the environment". Sustainable banks align all their financial activities with fairness, ethics and ecology. They are characterized by transparent lending processes and mandatory exclusion criteria for ethically questionable transactions. This means that they refuse to do unethical business with companies such as e.g. the arms and armaments industry, or with those that openly permit human rights violations or child labour. Instead, they invest in companies and projects that contribute to environmental and climate protection, as well as promoting education and social welfare.

In principle, all the money that private customers, institutions and companies have deposited in a bank in current and savings accounts can be used by the bank for all kinds of banking investments: from mortgage loans to private customers to investments in international companies and financial derivatives. Savings banks mainly invest in stocks and bonds.

Recent revelations from reports such as "Don´t Bank the Bomb", "Follow the Money", "Facing Finance" and "Dirty Profits" repeatedly raise the question of which banks are playing a role in the implementation of sustainable development goals, especially in the fight against nuclear weapons, the climate crisis and social exploitation. The report "Banking on Climate Chaos" reveals alarming facts about big banks' investments in the fossil fuel industry that are at odds with the goals of the 2015 Paris Climate Agreement. Although Article 2 of the Paris Agreement on climate change clearly states that financial flows must be directed towards low-carbon development, the report shows that investments in coal, oil and gas continue to rise, and 33 major international banks (with three German representatives) have since invested $1.9 trillion in fossil fuel production.

These alarming facts and figures highlight the need for a thorough review of the role of banks in achieving the SDGs. The demand for full transparency regarding investments in fossil fuels is just the beginning.

Of the more than 1,400 existing financial institutions in Germany, would you like to identify the most sustainable and fair banks? To this end, there are independent advisory committees, usually with different sustainability assessments, which are intended to ensure compliance with socio-ecological principles. The various institutions and organisations include, for example, Stiftung Warentest, Ökotest, consumer advice centres and, last but not least, the Fair Finance Guide. From our point of view, the Fair Finance Guide provides the most comprehensive analysis, which is re-evaluated annually.

The Fair Finance Guide Germany, in cooperation with Facing Finance e.V., the Südwind Institute and the Bremen Consumer Advice Centre, has examined the social and ecological voluntary commitments of 19 selected German banks and savings banks based on 286 criteria from 14 subject areas – not only from banks with existing sustainability standards. The last review was published in March 2023. The banks' policies for lending to companies, project financing, own investments and asset management were assessed. With us, you can compare all positively rated banks from the last Fair Finance Guide 2023 on current price and performance.*

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For ethically oriented private customers, it is therefore primarily a question of what policy the bank pursues when granting loans and other financial services. It is therefore of great importance that banks provide insight into their investment policy.

A social-ecological business policy that has a positive impact on the environment and society therefore comes from you and your bank account!

Your personal impact is greater than you might think. After all, our demand for sustainable banking is driving banks to adapt their practices accordingly. By channeling your capital into sustainable initiatives and promoting business practices that are focused on ethics and ecology, you contribute to the creation of a socially supportive and ecologically oriented economy.

Did you know that your savings and investments, can lead to more emissions than your everyday lifestyle? The newly founded platform MotherTree has set itself the task of measuring your personal influence – albeit in the UK for the time being.

So far, there are few published comparative values for the personal CO2 footprint of private investments, but this can be determined by two factors:

The question of how sustainable our financial decisions are affects not only banking, but also our personal lives. Each of us can take steps to practice financial sustainability. This starts with conscious budget planning and saving in order to make sustainable investments in one's own future. By choosing ethical and environmentally friendly products and services, we promote companies that take on socio-environmental responsibility. The goal is not only to use our money wisely, but also to bring our financial lives in line with our values.

Society plays a crucial role in shaping banking into a sustainable future. Our demand for sustainable products and services, but also our critical attitude towards banks that do not act according to ethical principles, has the potential to influence business policy. Every individual has the power to help shape the future of banking. Your decisions as a consumer are not just personal preferences, but a driving force for change in the financial world.

Your money can do good: there are already numerous banks that have fully aligned their business activities with socio-environmental sustainability!

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