Rebecca Pritchard, Head of Business Banking at Triodos Bank, looks at how this drive, along with the fossil fuel divestment movement, is also sparking a healthy debate in institutions about the impact their money has and their banking choices.
The call for divestment from students in the UK gathered momentum in 2011. Groups campaigned on campuses around the country to raise awareness and apply pressure to higher education institutions to remove investments from carbon-intensive energy sources. In the intervening years, charities and faith organisations have also been part of the avant-garde, cutting ties and investment – often very publicly – with fossil fuel companies. By 2016, the campaign had gained traction and around a quarter of UK universities had committed to some form of divestment totalling £10.7bn in assets.
Spurred on by staff, stakeholders, donors and customers, many universities have come to realise these holdings can’t be reconciled with the values of their institutions – nor, many would argue, with good financial sense, given the trajectory fossil fuels are on.
As the trend towards divestment gathers steam, a key question is being asked with more urgency and frequency: what future is our money building?
A good example is the University of Bristol, which last year unveiled its own plans to divest from fossil fuels. The strategy was a clear shift to align the impact of the University’s endowments to its wider commitments to sustainability. The University was already embarking on an ambitious review of its sustainability policies, including setting itself the goal to “mainstream sustainability in the minds of students and nurture future leaders in sustainable thinking”.
For this goal to have integrity, its investment strategy was required to follow suit. In plans outlined by the University’s CFO Robert Kerse, the policy would see an end to investments in companies deriving more than 5% of turnover from the extraction of thermal coal or oil and gas from tar sands.
But the University went further. Just weeks later, their board of trustees voted in favour of also establishing a deposit relationship with Triodos Bank. This was partly motivated by a decision to diversify because of the unpredictability of the market, but also a result of thinking that came about from the University’s fossil fuel divestment strategy.
In the UK, universities have in the region of £20bn in cash reserves. If we consider that the basic function of any bank is to take this money and lend it elsewhere in the economy to generate a return, it follows that any values-led university would like to understand how their money is used.
Research commissioned by Triodos has shown that over 60% of people want to know where their bank lends their money, but 75% are unaware of where it ends up. In the UK, opaque reporting means that very little information on lending activity is disclosed.
The UK banking sector is also marked by a lack of diversity, dominated by a few big players following a business model whose shortcomings are well documented since the 2008 financial crisis. Global banking is also awash with money used for things that undermine the values of the people and organisations it belongs to. The fossil fuel divestment movement has helped remind us of an important truth: for all the abstract talk that surrounds ‘global finance’, at the end of the day it is simply about what banks are doing with our money. Perhaps it is time to ask what is happening with yours?
To learn more, visit www.triodos.co.uk/deposits