A few weeks ago, I wrote a post about my mission and values statement, it represents an ongoing effort to live an ‘examined life’. Today I’d like to give attention to three financial decisions that my wife and I made made in order to better align ourselves with our values. In my experience, while people may be increasingly conscious of the environmental impact of typical consumer purchases, there isn’t as much focus on our finances. More specifically, how our chosen financial institutions use our money. In the absence of political leadership, this feels especially important.
Then Minister, now Prime Minister, Scott Morrisson with a lump of coal in Parliament
Let me preface this blog post with two points before I delve into why we made these decisions. First, our decisions are guided by a view that climate change is the biggest existential threat that we face. It is also well established that burning fossil fuels are the main driver of carbon emissions. Therefore we feel a moral imperative to examine our choices and how we can better position ourelves as agents of positive change. We both agree that supporting a transition to renewable energy systems, though not immune to challenges, is critical to acting on climate change. Second, I am not of the view that shifts in markets are sufficient to address the extent of action we need on climate change. In my view, pushing for systems change through people-led movements is crucial given the narrow window we have to mitigate the impacts of rising temperatures. However, I believe that our financial decisions can be an important driver , a lever that we can use to signal the kind of institutions we prefer. As they say, money talks. I want to be clear in saying that I see these sorts of decisions as part of a suite of responses, not a silver bullet.
Disclaimer: This is a personal blog based on my personal choices. I am not engaging in any paid promotion for any of the companies mentioned. I am not a financial advisor :)
Banking
I made the decision to be more conscious of which financial institutions I support in 2015. I’d attribute this to my engagement with the fossil fuel divestment movement.
I was staggered when I learnt that my bank at the time, Commonwealth Bank Australia (CBA) , was actively funding fossil fuel projects to the tune of AUD 26,533 million. It had no policy to phase out new coal and gas project investments at the time. It really got me thinking about how the money in my bank account was contributing to decisions that have global consequences. The more I looked into CBA’s operations, the less uncomfortable I got with being a customer. Consider the cruel irony of me being a customer whilst teaching stuents about sustainable development at a university, or being a co-founder of a solar company and a non profit in Malawi. Alas, finance by its very nature, entangles us in a range of outcomes that we may not be aware of.
To be clear, CBA is not the only guilty party. I encourage you to have a quick check of this table if you’d like to get a sense of where your bank stands. This relates to Australian banking institutions but I’m sure there are equivalents in many other countries. It bears mentioning that these decisions were made before the grotesque level of unethical practice in the banking and finance sector was laid bare in the Banking Royal Commission. Even more reason to make the switch!
In brief, we made the decision to move to Bendigo Bank and Bank Australia (including a mortgage) because:
a) They have a clear policy arond fossil fuel investments:
"In respect of our own carbon footprint we make conscious decisions to reduce and offset our impact and we help others do the same by offering green products and services. As we do not currently lend to projects in the coal and coal seam gas sectors, we are simply taking a pragmatic approach that says it makes no sense to broaden our footprint by starting to do so." - Bendigo Bank
"Bank Australia has not made and will not make any loans to the fossil fuel industry, including coal and coal seam gas. Bank Australia is also conscious of the impact of its own operations and has been carbon neutral since 2011."
b) They have more ethical operating models with a focus on community investment of profits and not offshoring jobs.
c) They both have great reputations in terms of customer service and offering competitive rates.
We have been really happy with this switch. I can point to no real downsides - especially since we barely use cash and seldom have a need to use an ATM (one of the drawbacks of smaller banks). They both have offered excellent customer service, competitive rates and have great mobile apps.
There’s a common joke that we are more likely to change partners than we are to change banks. Unfortunately, there’s some truth to it. Many people are rusted on to their banks and can’t find the motivation to change. But now, with action on climate being so vital , and the gross unethical conduct of the larger banks being exposed, here are few rational reasons to stay with these institutions beyond matters of rates and service. I encourage you to consider the ethics of your current bank. Should you want to switch, my experience is that is way far less painful than I imagined. It is getting easier and easier to transfer all your direct debits to a new account.
All in all we are glad that our money is being channeled to comparatively more ethical and sustainable financial institutions.
2. Superanuation
When considering how our money was being invested by our banks, it was only natural to consider how our superannuation funds were being invested. We accumulate these savings over decades and we thought it prudent to be more considered about how it is invested. For those outside Australia, superannuation is essentially a pension fund.
Working for a university, I was effectively ‘locked in’ to Unisuper. While it is a high performing industry fund, I was not pleased with the vague langauge on the subject to ethical investment criteria e.g. gambling, live export of animals, tobacco. There was no clarity with respect to what they considered ‘sustainable’ and as an analysis revealed, their ‘sustainable fund’ invests in fossil-fuel copanies and lenders. As with my bank, I decided to switch. I won’t get into the weeds with the details but I managed to use the end of a work contract to transfer the vast majority of my super to a new fund. While I’m still with Unisuper, I transfer my accumulations across on an annual basis. I concede that this is not ideal, but I think it is worth sticking to my values. For most people, switching your super is just a matter of sending a simple form to your payroll. Extremely easy!
I encourage you to have a look at how your super fund stacks up. We decided to opt for Future Super as they were clearly committed to fossil fuel divestment, in addition to other ethical screens. An aspect of their model that I especially like is their commitment to investing in local renewable energy projects. An interesting point in this regard is that Australia is already on track to achieve an energy mix with 50% renewables by 2030 (despite Govt efforts), just 7.7% of super savings could drive that up to 100% in the same time frame. Indeed, a recent impact report by Future Super points to the positive impacts of our ‘Renewables Plus’ investment portfolio:
“We're the only superfund with investments that are taking more carbon out of the air than they're emitting.
Each person with a balance of $35K or more in Future Super's Renewable Plus Option can say they are cutting roughly 4x more emissions than by going car free and 13x more than by shifting to a completely meat-free diet.”
These are great outcomes! It hasn’t come at the cost of financial performance either, the fund currently averages 5.5% p.a. and in my experience has fewer administrative fees than most funds (they do a lot of damage to savings over time). Ostensibly, their returns are set to improve further given that market forces are increasingly tilting towards renewable energy. My experience of the Future Super team has been that they are committed and responsive. I find their ethical screens to be the best I’ve come across so far.
Suffice to say, we are very happy with our switch and feel that it presents a substantially more positive investment vehicle than our previous funds. My intention here isn’t necessarily to spruik Future Super. Rather, it is to invite you to consider the ethics of your current superfund. Is your hard earned money conrributing to positive causes? Or at the very least, minimizing harm?
I honestly believe that our superannuation funds are a vital lever in the push for a more ethical and sustianable future. We have the power to channel millions, if not billions, towards better outcome for present and future generations.
Best,
Shanil
Drop me a comment. I’d love to hear your thoughts on this topic.