Hello!
Whoa, you came back to read more about finance from a guy who mostly uses the term “good investment” to justify buying something that’s too expensive. Really really really: Do not mistake this email for financial advice. It’s not. The last one wasn’t either. I am not a financial professional. The only thing I really know about money is that if you forward this to everyone you know, we’re all gonna get rich. Why not take a minute to make it rain:
Last week, we parted with a cliffhanger. I’ll re-post the meaty part:
Interestingly, individuals’ bank partners/choice of bank is the largest contributor to their personal footprints. The largest 4 Wall Street banks—JPMorgan Chase, Wells Fargo, Bank of America, Citibank—are the top 4 largest financiers of fossil fuels in the world, and their numbers are going up rather than down.
The note was from Vanessa Fajans-Turner, Executive Director of Bankfwd, an initiative of the Rockefeller foundations aimed at getting financial institutions to play a role in curbing global emissions. The organization tries to induce banks to make various commitments—like adhering to the Intergovernmental Panel on Climate Change (IPCC) P1 1.5°C pathway. A major component of that is getting them to stop funding new fossil fuel projects.
“The infrastructure that banks invest in—we’re not going to even begin to see the penalty for that until 10-15 years from now, when we really can’t afford it,” says Fajans-Turner. “And they will have locked-in incentives to make sure those come online because they need to get paid back.” To hell with that, right? Fajans-Turner’s position is that we should all take our money out of their accounts so they can’t use it to screw with the Arctic even more.
“That’s not how it works,” says the anonymous money manager I talked to about sustainable investing. “The whole reason you can walk into a bank any time and get all of your money is because they don’t invest it like that. They park consumer cash in treasuries and put their institutional clients’ money into the higher-yield projects.”
Fajans-Turner counters that money is fungible, and anything you give to a bank just contributes to its overall pile. They are going to have to agree to disagree, because that’s almost a philosophical debate that I am not qualified to referee. (Want me to introduce you two?) What they’d both agree on is that banks make money off you—with fees, loans, penalties, and so on—and you don’t have to give your cash to companies that don’t share your values.
So what do you do, call your bank and ask to speak to someone about sustainability? I did, and it was a total bust. I sat on hold for like 9,000 hours and then was told to look up their online sustainability pledge. That pledge was actually fairly encouraging:
Building on our longstanding support for the Paris Climate Agreement, we have a goal to achieve net zero greenhouse gas (GHG) emissions in our financing activities, operations and supply chain before 2050.
Our Environmental Business Initiative will deploy and mobilize $1 trillion by 2030 to accelerate the transition to a low-carbon, sustainable economy, as part of a broader $1.5 trillion sustainable finance goal aligned to addressing the United Nation’s [sic] Sustainable Development Goals (SDGs)…
So I sent it to Fajans-Turner, who basically told me I’d fallen for their bullshit. “It’s promising that Wall Street banks recognize the need to wind down production of fossil fuels, but so far their announcements are greenwash,” she says. Boo, my bank! “Achieving net-zero emissions by 2050 requires that banks stop funding new fossil fuel projects today.” According to her, my bank’s net-zero pledge is mathematically impossible unless it stops its fossil fuel financing immediately.
According to the Rainforest Action Network, which is doing some incredible research in this area, my bank is… not. It invested nearly $50 Billion in fossil fuels in 2020. When you’re reading these sustainability pledges—and we should all build that into our routines—look for future-tense promises like “we plan to stop clearcutting the enchanted forest some day.” Another tricky buzz-phrase: operational net-zero, which means that a company cuts and/or offsets emissions from its own day-to-day activities but not necessarily its business. Sneaky.
How do you know how your bank is doing? The Rainforest Action Network’s 2021 report is a good place to start. According to its research, “in the 5 years since the Paris Agreement was adopted, the world’s 60 largest private sector banks financed fossil fuels with $3.8 trillion.” That is not the right direction. Scroll down to page 7 for their ranking of those 60 banks. And check out bank.green’s slick search tool, which goes beyond RAN’s top 60. Bankfwd also has a lot of research into big banks that you can read here.
So what do you do with all this information? This is a big decision, and the truth is, low-net-worth people (normals like me and probably you) do not have the financial power to punish huge actors like JP Morgan Chase by taking our deposits away from them. We do, however, have the ability to reward smaller institutions. Credit unions and local banks are good options to explore, and your money will make more of a difference to them. There’s probably one near you, and they’re probably doling out money to your neighbors rather than BP. Many are bankrolling sustainable local initiatives as well.
In addition to credit unions and local banks, Fajans-Turner recommends Amalgamated and Beneficial State as large-ish institutions that are making real strides in the climate space. Leaving the mainstream does have its compromises: These banks’ apps kind of suck, and you’re not going to find one of their ATMs the next time you’re in Jakarta. But you’re also not financing the end of the world.
For my part, I’m looking to local banks and credit unions. I called one, and somebody picked up the phone on the third ring. She seemed confident they could match everything our big bank gives us and invited me to come in and talk about it. Fingers crossed that they can and that their mobile banking situation isn’t complete garbage.
Give some away
I can’t tell you where to donate your money. Assessing every organization in the sustainability sphere is a massive project that should probably be its own company. And in fact it is. Charity Navigator is itself a 501(c)3 that allows you to research other nonprofits and see how they rate on factors ranging from how they allocate their funds internally to what kind of results they get.
Like Sustainalitics, it’s imperfect, limited by the need to make everything scannable and simple. It can save you from getting hosed, but I’d use it as more of a starting point than a referendum on a nonprofit you’re interested in.
I’ve talked to a few philanthropists about how they give, and was pretty stunned by how much work they put in themselves. I guess I expected really wealthy people to just write checks based on someone else’s research. I am sure those folks exist, but I didn’t talk to any of them.
The people I spoke with emphasized looking at how clearly an organization articulates what it does and how effective it is at doing what it says it will do. Do they say they’re going to save dolphins? Well, how many dolphins have they saved? How much habitat have they restored, and what are they doing about net-fishing in target areas? That’s reductive, but you get the idea.
You should also look at the organization’s leadership. Is its board filled with people who have expertise and standing in the area on which it focuses? If that’s too nuanced… do they look like badasses?
One of our favorite organizations is No Kid Hungry (“Help feed hungry kids” A+). Check out this highlight from its board:
An honors graduate of Harvard College with a degree in Applied Mathematics and Economics, Joanne left a career as a management consultant to enter the world of professional cooking. She is the chef and co-owner of Flour Bakery + Café, with eight locations in the Boston area, and Myers + Chang along with her husband and business partner Christopher Myers. She is the winner of the James Beard Award for Outstanding Baker in 2016. She is also the author of five cookbooks…
I don’t know this woman at all, just picked her name off the website and clicked her bio. But if you were looking for someone who could figure out how to feed people, wouldn’t you want her advice?
So, now that you’re ready to work, how do you make the most of your giving? I’ve started breaking nonprofits down into three categories:
Systemic. These organizations act on upstream causes that can lead to environmental issues. Take, for example, income inequality, which is well-documented in its negative impact on the environment.
Direct action. These ones will use your money to fund a specific project. This is where I file orgs like Earthjustice, which litigates on behalf of environmental causes.
Adjacent. This kind of organization applies pressure from different angles to effect positive change. My favorite examples of this are (surprise!) media nonprofits. Shoutout to Grist and Inside Climate News. The stories these outlets break shine light into dark corners, holding government and industry accountable for their actions.
A good approach could be to split your giving across all three categories. Do you have a different breakdown? I’d love to hear it.
A few of you wrote in with specific questions about how much someone should give—both for impact and for a tax benefit. I started researching this, but when I started turning that research into sentences, it didn’t sound like one5c anymore. So I stopped.
My best answer on the impact front is to give until it hurts. I asked one5c’s accountant about the tax aspect, and he yelled at me. “If you want to make a charitable contribution, make it,” he said. He actually shouted that, and then went on to talk about how his doctor couldn’t figure out why he had high blood pressure. “If you get a tax deduction, that’s just an extra benefit.”
That sentiment is actually applicable to every part of this series—buying stuff, investing, banking, and, of course, donating. If you’re trying to use your money to do good, that good is what you should expect in return. Anything else is just righteous gravy.
Take care of yourself—and each other
Joe
joe@one5c.com