Part one of this series of posts on the 1.5c life challenge is here. Part two is here. Part three is here. This information is of a general nature and is not intended to provide
you with financial advice or take into account your personal objectives,
financial situation or needs.
Alright, so I've finally gotten onto the second email of the 1.5 degree lifestyle challenge. Thankfully, the next email only has one action to tackle, not a whole list; unfortunately, it's one that has taken a bit of work, and has taken me some time to get to. Have a think about who you bank with.
Now, the fact that I'm with Australian Ethical super would suggest that I've already had a think about this one - but the truth is, I found it much harder to tackle switching bank than my super. Superannuation is a background process, and there's pretty simple rollover tools to get old funds switched into new ones. But I've been with Commonwealth Bank since I was in primary school in 1993, so I've put changing everything that goes into and out of my account into the too-hard basket - until now.
There is a campaign website to help you make a more sustainable choice of bank, at least in Australia - Market Forces. They detail all the known lending banks have done to the fossil fuel industries, and have position statements from many banks. Commonwealth is the best of our big four banks, but that's not a very high bar; they have loaned at least $7.2 billion AUD to fossil fuel projects since 2015, four times as much as they have loaned to renewables. None rank among the big twenty global lenders to fossil fuels, but they are fuelling a wave of new projects in this country.
The science is clear - a 2019 study showed that even letting existing fossil fuel infrastructure continue to function for its expected lifetime will only give us a 64% chance of keeping to a 1.5c timeline. If new infrastructure being built today is used for its full lifespan, it will almost certainly guarantee we cannot keep within 1.5c of global warming and the slim chance we have left of avoiding runaway climate change.
Although Commbank has started to get out of loans to the coal industry - with a plan to exit fully by 2030 - it has been funding expansion of gas infrastructure, including new LNG vessels and a pipeline in the USA. So, if I'm going to live a 1.5c lifestyle, I guess I'd better find a bank which isn't funding projects that will destroy a habitable climate.
The Australian Ethical campaign email suggested Bank Australia. They certainly pass muster, with no money invested in fossil fuels, and a statement on the Market Forces website that they have been carbon neutral since 2011. However, looking over the numbers, their accounts charge fees and their interest rates on savings account aren't as high as others right now. So I've decided to switch to another bank that doesn't finance fossil fuels - the Credit Union of Australia. Last week, I finally got the ball rolling, and although it will take some time and follow-up to get it all moved over, I've made sure to let Commbank know why I'm switching. As of yet, I've had no response from them.
If every Australian switched bank (and make clear they were doing it for the climate), how big of an impact would it make? Would it keep us within a 1.5c carbon budget? The answer is somewhat mixed, but when it comes to coal mining, it could have a fairly substantial impact.
Globally, while state subsidies and international financial institutions do play their part, the biggest financiers of coal mining are private lenders. Around 70% of global coal mining operations are actually running at a loss, so without loans and government support, they wouldn't be able to keep operating. When it comes to Australia, many of our mines are run as local subsidiaries of global conglomerates, so some of that "loss" is simply profits being offshored to India, the USA or China, to avoid being taxed locally; without loans from local banks, that couldn't be maintained, and projects here might have to stop operating or start paying their fair share.
The campaigns for divestment from fossil fuels have had a big enough impact that thermal coal companies (those mining coal to burn for power generation, as opposed to steel making) have begun signing non-disclosure agreements with their lenders.
The global campaigns for fossil fuel divestment can have a big impact on coal mining in Australia, but what about globally? Is it producing enough change to keep us within a 1.5c timeline? In the words of Emma Herd, chief executive of the investor group on climate change at Climate Action 100+, "is it happening fast enough? I think the science says no."
When we look at the global picture switching banks or super starts to lose effectiveness. The top lender to coal mines in Australia from 2008 to 2016 wasn't an Australian bank, but the Bank of China, one of those big twenty global lenders. Australians switching our banks won't even dry up all the funds fuelling coal mining in this country. And nor will they touch some of the biggest coal mines globally, such as those operated by the Shenhua group, a state-owned enterprise with other avenues of capital than private banking.
When it comes to other fossil fuels than coal, switching banks is going to do even less to result in meaningful change - and in fact, the argument can be made that it will make things worse. That's because the majority of oil and natural gas producers are state-owned companies, which generally don't have to report their operations to shareholders, and often operate without environmental targets open to external scrutiny. Switching banks won't significantly lower the emissions from Australia's transport sector - which have increased by 60% since 1990.
Even the large companies listed on the stock market are, to some extent, willing to defy the economics. They must keep finding and opening up new reserves to exploit in order to keep their "reserve-replacement" ratio - the amount of resources they could extract in the future compared to the amount they are currently selling. Without this guarantee of future dividends, stockmarket investors (like the large global pension funds and banks) wouldn't keep investing in a company.
So, is this action really consistent with a 1.5c lifestyle? At least for those of us living in Australia, switching bank and superannuation (and letting your polluting old funds know why you are doing it) is a useful tactic. But on its own, it's not enough to see to it that fossil fuel projects no longer gain funding; joining in with campaigns to ensure no new fossil fuel reserves are exploited and we convert to a decarbonised grid and industrial base are just as, if not more, important.
Next time I'll tackle another thorny issue that has been vexing me - meat.
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