Organisations are increasingly recognising the importance of adapting their activities to low-impact, efficient and sustainable alternatives to reflect the values of those they serve. Rebecca Pritchard, head of business banking at Triodos Bank UK, looks at how the fossil fuel divestment movement is also sparking a healthy debate in institutions such as universities, charities and across society, about the impact their money has.
The call for divestment in the UK began with students 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. The University of Edinburgh University has divested following student pressure, making it the largest university fund in the UK to ditch all oil, coal and gas holdings.
The campaign has broadened to charities with high-profile challenges put to groups such as the Bill and Melinda Gates Foundation and the Wellcome Trust. More recently, campaigners and politicians at last year’s One Planet summit redoubled pressure for greater fossil fuel divestment, saying that emissions targets would be missed if there wasn’t a more immediate response.
Spurred on by staff, stakeholders, donors and customers, these institutions have come to realise these holdings couldn’t be reconciled with the values of their institutions – nor, many would argue, with good financial sense, given the trajectory many believe fossil fuels are on.
Wherever the debate takes place – on university campuses, in the board meetings of charity trustees or in the media – the same key question is being asked: what future is our money building?
Recently, the University of Bristol 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 by January 2018.
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.
The investment funds and endowments hitting the headlines are only part of the story. Global banking is awash with money used for things that undermine the values of the people and organisations it actually belongs to.
In the UK universities have in the region of £20bn in cash reserves, while charities have around £50bn. 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 organisation would like to understand how their money is used.
Our research 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, which impedes this understanding.
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. A lack of choice in banking services has simply forced values-led organisations into relationships that undermine the ethos on which they’ve been built.
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?
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Rebecca joined Triodos Bank UK in September 2013 and leads the team responsible for UK business banking activities with SMEs, social enterprises and charities, with particular focus on the Environmental, Food & Farming, and Social and cultural sectors.