Make your finances sustainable: how to decarbonise your money

There’s more to making sustainable choices than bringing a keep-cup to your local café. Australians may be curious to know which financial areas can make the biggest impact if you switch to an environmentally friendly company, so you can decarbonise your money

What it means to make your finances sustainable

Opting to make your finances sustainable is another way of describing consumer choice to switch to more ethical, green financial products or providers

One person’s definition of what is sustainable finance may differ from the next, but it typically means choosing companies for your financial products that do not invest in others that are harmful to the environment and communities, or support them through having them as customers.

A 2017 report found that just 100 companies have been found responsible for over 70% of the world’s greenhouse gas emissions since 1988. The Carbon Majors Report also found that a fifth of global industrial greenhouse gas emissions are backed by public investment, so it’s safe to say your individual consumer choice can play a significant role in combatting climate change.

Upon release of the report, Michael Brune, executive director of US environmental organisation the Sierra Club, said: “Not only is it morally risky, it’s economically risky.”

“The world is moving away from fossil fuels towards clean energy and is doing so at an accelerated pace. Those left holding investments in fossil fuel companies will find their investments becoming more and more risky over time,” said Mr Brune

How to decarbonise your money

For your personal investments, whether through signing up as a customer for your humble savings account, or the home and contents insurer you choose, you may be able to make a personal impact by switching to a more ethical, green company.

It may be worth taking the time to compare different providers across a range of categories to choose the sustainable option that also best suits your needs and budget. This is because larger companies that rely on fossil-fuel investments can often afford to pass discounts on to customers. You may find that a more ethical financial provider could cost more in terms of interest or fees, but for many Australians, moving away from unethical providers may be worth the cost.

Some of the key areas where you could make the largest impact include:

Energy providers

There are a number of energy providers listed on the Carbon Majors Report of biggest producers of greenhouse gas emissions. Given that many providers rely on fossil fuels and other non-renewable sources for power in Australia, it’s a no-brainer that if you want sustainable finances, you should start with your energy provider.

One way to choose a more sustainable energy provider is to take the plunge and consider installing solar power. Utilising renewable resources for your energy is a competitive way to skip the middle-man and become your own ethical energy provider.

However, if you’re not ready to switch to solar, you can start with choosing a more ethical electricity provider. In 2022, environmentalist organisation, Greenpeace, released a comprehensive ranking of the most sustainable electricity providers in its Green Electricity Guide. From this research, the top give most sustainable electricity providers in Australia were found to be:

1. Diamond Energy
2. Momentum Energy
3. Energy Locals
4. Aurora Energy
5. Indigo Power

Banks and bank accounts

If you’ve been with the same bank since you were a child, there is a chance you’ve been passively engaging with a company that invests in or supports carbon-emitting corporations. If you’ve never taken the time to look into your current bank, it may be worth performing a google search to see if it:

• Invests in fossil fuel or gas-sector companies.
• Invests in others sectors that support adverse behaviours, such as animal cruelty, weapons manufacturing, tobacco and more.
• Has active sustainable practices or values in place in which it prioritises ethical investments.

Currently, two of the biggest names in ethical banking in Australia are Bank Australia and Teachers Mutual Bank.

Bank Australia  is a customer-owned bank that’s ethical credentials include having a responsible banking policy in place, having a B Corporation certificate, and being part of the Global Alliance for Banking on Values. Just recently it announced it would cease funding for car loans for fossil-fuel vehicles as of 2025.

Teachers Mutual Bankwas ranked one of the world’s Most Ethical Companies. It has a policy of never lending money to the fossil fuel industry and supports the education community by promising to reinvest funds back into it. It’s not just your bank account that is more sustainable, but Teachers Mutual Bank also has deposit accounts and home loans that are Certified Responsible investments.

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Investments

Consider putting your money where your mouth is and looking at the benefits of ethical investments, including shares and ETFs. Two investment strategies to consider are positive and negative screening:

• Positive screening – Seeking out companies that specifically champion ethical and sustainable investments. For example, ETF ERTH tracks 100 leading global companies that source at least 50% of their revenues from products and services working to address or reduce climate change impacts.
• Negative screening – Actively identifying companies that have poor environmental records, high carbon footprints, adverse social impacts and more, so you know to outright avoid them when you make your final investment decision.

Positive and negative screening are forms of peer comparison, and investors will commonly rely on its environmental, social and governance (ESG) criteria to determine the best option to buy into. ESG is a standard for company behaviour used to showcase to investors which companies are ethical and sustainable, and which engage in risky or unethical practices.

Superannuation

Don’t consider yourself an investor? Think again, as the superannuation fund you keep your retirement nest egg with could be earning a return based on unethical investments. It may be worth considering if switching to an ethical super fund could better suit your goals.

An ethical super fund is simply one that meets the aforementioned sustainable criteria, whether by supporting companies and sectors helping the environment or local communities, and avoiding those that harm them.

If you’ve never considered how your superannuation fund invests your hard-earned savings, it may be worth taking the time to look up your current investment strategy and portfolio. If you are not happy with how your nest egg is being invested, it may be worth comparing ethical superannuation funds.

Some funds offer their members ethical investment by being dedicated specifically to ethical investments, such as Australian Ethical super fund. Others may offer an ethical investment option alongside options that may not necessarily prioritise ethical responsibility. Take the time to consider all your options and choose the super fund that best suits your financial situation and needs.

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Telco

While you’re decarbonising your finances, you don’t want to leave out your trusty mobile phone. Green telcos in Australia are those that have installed sustainable practices to reduce its impact on the environment, such as through committing to carbon neutrality or having better recycling and e-waste strategies available.

A recent article found that telcos adopting circularity strategies may be able to considerably lessen their emissions. According to KPMG, for telcos, a circular economy is one that prioritises preserving the value of products, materials, and resources for as long as possible, by maximising the product life cycle, and minimising waste, at the same time. In fact, the value of recycled hardware to the telco industry could reach anywhere from $45-$80bn annually by 2030.

Vodafone is one telco that is utilising the circular economy through its internal asset marketplace. This marketplace allows the company’s network to repurpose excess stock or decommissioned hardware. Its internal asset marketplace is one part of Vodafone’s greater goal to reuse, resell or recycle 100% of its network waste by 2025. Vodafone’s latest annual report showed that this initiative helped reduce CO2 emissions by 2,500 tonnes, and saved the company over $17m AUD.

Telstra’s latest Sustainability Report outlines the steps the telco giant is taking to raise the bar on sustainability in its industry. Not only was Telstra certified by the Australian Government’s Climate Active program as carbon neutral in 2020, but it is also currently on track to achieve additional climate targets:

• Reduce absolute emissions from FY19 by 50% by 2030
• Enable renewable energy generation equivalent to 100% of its consumption by 2025.

Telstra also utilises programs to reuse and recycle devices and their packaging and is growing its programs for digital inclusion. This includes building more networks in regional and remote areas, and ensuring affordable products and services are available in Australia, particularly for those aged over 65.

Insurance

In Australia, there are a multitude of insurance provider options for your car, home and contents, health and more. In terms of sustainability, three of the biggest insurers – IAG, Suncorp and QBE – are still involved in fossil fuel companies in some way. Luckily, over the next few years the three insurers are looking to step away from investing in, or underwriting for, more unethical companies and sectors

In the meantime, if you want to make the switch to more sustainable insurers as soon as possible, there are options available to you. Two major providers have been listed by sustainability campaigners, MarketForce.org, as explicitly stating they do not invest in, or underwrite for, companies that operate in the fossil fuel sector: Auto & General and Huddle. This also includes related providers, Budget Direct and Oceania Insurance.

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