Why purpose driven finance is more important than ever

There's an appetite for purpose driven solutions post-pandemic

With the climate emergency raging, the cost of living crisis showing no signs of slowing and greenwashing seemingly rife across all industries from construction to banking, I’m sure I’m not alone in feeling more strongly than ever that green and purpose driven finance could hold the key to a more sustainable future for everyone. 

In this article, I explore why purpose driven banking is more important than ever and why it’s time to make the switch. 

The state of green banking 

In a recent poll by Deloitte, the Better Banking Survey, more than 60% of the 1,250 British adult respondents said that they would leave their current bank – even if it had the best financial offering – if they were to learn that it was linked to environmental or social harm. However, the same survey showed that 55% of respondents didn’t even know what green banking was.

The irony here is that the four biggest banks in the UK still hold the vast majority of customers, despite being intrinsically linked to industries that cause harm to the planet, including arms and fossil fuels. In fact, some of the biggest banks have recently been revealed to pump billions of pounds into gas and oil production, despite being part of green banking groups and publicly claiming to be focused on hitting their net zero pledges and focusing on environmental projects. 

This begs the question: are the 60% of people who say they would leave their bank if it caused social or environmental harm simply unaware of what their bank is investing in? Or are they all already green bankers? 

The appetite for purpose driven solutions post-pandemic

Putting on a positive hat for a moment, 2020 did see a big swing in the green banking movement, as a State of Green Banks survey showed. As the first survey of its kind, it found that the number of countries actively exploring green banking has massively increased and now 27 green banks exist across 12 countries. In fact, the report only tells part of the story - purpose driven banks like Charity Bank, Triodos and Unity Trust as well as credit unions, Community Development Finance Institutions and building societies have all been growing strongly too.

A further bright side is that younger generations are more interested in green and digital banking options. So while the older generation stick with their fossil-fueling corporations, the future of purpose-driven banking, at least, looks a little brighter. The heartening statistic that only 25% of Gen Z use a megabank should be tempered by looking at who those younger people are switching to. Despite being perhaps more engaged than ever in issues of environmental and social justice, they are mostly moving to digital challenger banks - underscoring the importance to purpose-driven banks and credit unions of building attractive propositions, particularly digitally, if they are to attract this group.

Perhaps in response to this lack of interest from the next generation in choosing big banks, some of the UK’s biggest financial institutions have begun to launch green products and initiatives which, at least on the surface, appear to lean into the trend for ethical banking and combating climate change, although they have their own challenges in improving their digital proposition enough to compete with digital-only institutions.

With banks like HSBC, Barclays, and Natwest still funding fossil fuels, the greenwashing seems futile and the only answer, as far as I can see, is for a total green banking revolution. Digital-only banks are making some headway by going totally paperless and processing all of their transactions online. Meanwhile, purpose-driven banks, including those focussed on the green agenda, continue to grow strongly.

My main reason for believing that green and purpose driven finance is more important now than ever isn’t just down to the environment. It’s for the benefit of the people, too. Sticking with big banks simply might not be the smartest way to handle your money in the midst of a financial crisis.

Creating a better and more purpose driven world

Switching to a green bank is easy, and often offers financial rewards if you set up your direct debits from your new current account. That’s extra cash to go towards your bills, and one less account in a big, environment-destroying banking corporation.

Smaller banks and building societies are also often kinder for your savings, with decent interest rates and the reassurance that your money isn’t being invested into the arms trade or offshore oil rigs. They’re also far more transparent about where they do invest their money, so if you’re struggling to find out who your bank has ties to, the sad truth is that it’s probably not putting its money into sustainable sources. 

So, if you’re umming and ahhing about whether switching your finances to a purpose driven banking option is worth the hassle, the answer is yes. Now more than ever.

Here at Great Western Credit Union, we believe that green and purpose driven finance allows both people and the planet to thrive. When members use our services, money is reinvested into nearby neighbourhoods, communities and businesses, helping to support the local economy rather than projects that aim to harm the earth. 

We believe we all have a responsibility to make the world a better place and we aim to work with every member who joins to that end. If you would like to learn more, please contact a member of our team via email or call 0117 924 7309.

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Posted on
16 June 2022