For your financial future

A greener money agenda

Angela Stevens
April 5, 2022

A greener agenda, you say? It’s all about combating our planet’s ‘code-red’ situation…

With our laser focus on COVID-19’s cousin – the Delta variant – we may have overlooked the release of the Intergovernmental Panel on Climate Change’s (IPCC’s) report on the climate crisis. 

Borne out of a partnership between the United Nations Environment Program and the World Meteorological Organisation, the IPCC report examines the widespread environmental risks and impact of climate change across the globe – from unprecedented, extreme weather events (think intense bushfires) to rising sea levels. The report is a sobering assessment of our planet’s future: the climate crisis is upon us…and, according to UN Secretary-General António Guterres, it’s a “code-red for humanity”

Climate scientists contend that urgent action is needed to slash greenhouse gas emissions (GHGs) and keep global temperatures from rising above 1.5°C. Numerous OECD countries have made binding commitments to achieve net-zero emissions by 2050. However, Australia’s climate policy remains one of the worst-performing in the world; we’re struggling to meet our already insufficient emissions reduction targets of 26-28% below 2005-levels and the government has spruiked a ‘gas-fired’ economic recovery from the COVID-19 pandemic. Shockingly, a recent report by the Australia Institute found that we’re among the highest emitters of GHGs on a per-capita basis and our emissions from energy use increased by 18 million tonnes of CO2 each year from 2005 to 2019. 

The clamour for climate action has escalated since early 2020 following the catastrophic impact of Australia’s summer bushfires. Mounting fear of the climate crisis has dominated the concerns of over eight in ten Australians and confidence in our political leaders has dwindled. There has never been a more helpful time for us to evaluate how our everyday spending and consumption choices affect our planet and the small steps we can take to align our money with our values. 

From little things, big things grow: have you considered ethical investing?

Ethical investing helps us to walk the tightrope between profit and purpose. Here, our aim is to invest our money in companies with more sustainable business practices for an equitable and clean-energy future. A detailed overview of how you can build a more ethical investing portfolio can be found in one of our recent articles. 

But if you feel too intimidated to buy your own shares and ETFs, you could switch your attention and make greater personal contributions to your superfund – after all, they invest our retirement savings for us. Crucially, super is a long-term investment – the money we add to our super over our lifetimes can amount to over 35 years of savings! 

Did you know that more than $3 trillion is currently invested through Australian superfunds? In fact, a survey conducted by the Responsible Investment Association of Australasia (RIAA) found that a whopping 90% of Australians expect their money to be invested ethically. Better still, Australian Ethical’s 2020 survey found that climate change and the environment were the “primary drivers” for young investors. 

In particular, ethical superfunds screen out certain industries they consider unworthy of investment, or those more likely to cause environmental harm, like oil, gas and tobacco companies. The proof lies in the results: female-led ethical superfund Verve Super has shifted over $150 million in members’ savings away from fossil fuels in three years. In any case, here are three valuable factors to consider if you’re looking to make a switch to a more ethical superfund (you can find a list of them here and here!):

  • Which industries does your current superfund invest in? Do their investment choices contradict your values? Do they offer any ‘green’ or ‘ethical’ investment options? You could take a closer look at your superfund’s product disclosure statement (PDS) to find out where your money is being invested. Beyond doing your own research, you could also consider using Market Forces’ comparison tool to evaluate superfunds based on their likelihood to invest in fossil fuel companies. 
  • What do your superfund’s average returns look like? Here, it’s best to compare your superfund’s returns over the past five years – this time horizon will help you to discern a more accurate picture of your superfund’s performance and determine just how competitive their returns are. You can compare your superfund’s returns with others using this tool. 
  • How expensive are your fees? Australians spend over $30 billion in super fees each year and although ethical and mainstream superfunds generally offer similar fees, a key consideration here is to minimise as many of your out-of-pocket costs as possible. 

Should you break up with your bank? Here’s how you can make ethical banking work for you!

When we safely stow away our money away in a savings account, our bank pays us a tiny bit of interest as a small token of appreciation. At the same time, our banks often lend money to larger clients at a much higher interest rate, often investing in fossil fuel projects with detrimental environmental effects. Startlingly, the Big Four banks (think NAB, Westpac, ANZ and Commonwealth Bank) have “fuelled the fire” by loaning over $70 billion to the fossil fuels industry since 2008. 

With all this in mind, you might consider switching to a greener bank, which actively attempts to make their business practices more sustainable and reduce any harmful environmental impacts of their products and investments. Let’s break these two criteria down, shall we?

  • Environmentally-friendly business practices: these may include installing solar panels on the rooves of their local branches and any emissions targets the bank has set, alongside the GHGs used in their daily operations. You can usually find out more about these practices by leafing through your bank’s Annual Report or Sustainability Report (if they’ve got one…but if they don’t, well, yikes!). 
  • Sustainable investment choices and products, or socially and environmentally conscious lending criteria: in much the same way that superfunds negatively screen (‘screen out’) companies that they invest in, banks too can actively avoid giving loans to fossil fuel companies and instead support social and sustainable housing initiatives, or offer home loan packages for homes that draw on renewable power sources. 

A common misconception about ethical banks is that they demand higher fees, a myth that the RIAA has thoroughly debunked. You can also compare a list of ethical banks with those that have a record of investing in fossil fuel companies using these three tools from Market Forces, Finder and Canstar. 

Still not convinced? A leading European bank, Nordea, found that switching to an ethical bank is 27 times more effective for the planet than eating less meat, or taking shorter showers and trips to work via public transport. So much for that Myki yearly pass! 

If you’re still on the lookout for more sustainable money moves, check out these three initiatives!

You may be surprised to learn that food waste costs the Australian economy $20 billion each year, producing over 500,000 tonnes of CO2. Bring Me Home is an app and food technology company dedicated to connecting customers across Victoria, Queensland and New South Wales with their favourite restaurants, cafes and food venues looking to reduce their food waste. In doing so, Bring Me Home offers unsold food at affordable prices, helping to alleviate the burden of food insecurity for those in need. Over the past three years, Bring Me Home’s 10,000 users have rescued almost 6 tonnes of food and reduced 11 tonnes of atmospheric CO2!

If you’re looking to transition more gradually towards a greener lifestyle, you could consider downloading One Small Step, an app and social enterprise that draws on behavioural science to help you develop environmentally-conscious habits. The app prepares a program tailored to your carbon footprint and your living circumstances, like your income and number of people you live with. The app hit 8,000 downloads in May 2021 and aims to reach just shy of 30 million users by incentivising them to reduce their emissions to the United Nations’ 2050 goal of 2 tonnes of CO2 each year. The best part? The app offers a popular green finance program, providing users with an overview of climate conscious superfund and banking options, alongside a step-by-step guide for those looking to make the switch!

Alternatively, consider looking to the great (vertical) outdoors by building your own vertical garden! With almost 70% of the world’s booming population expected to be living in urban areas by 2050, vertical gardens are an innovative and creative way to reduce our apartment building’s carbon footprint by improving surrounding air quality and filtering out CO2. Beyond their aesthetic merits, a vertical garden can be assembled in the smallest indoor and outdoor spaces – essentially, we’re growing stacks of crops upwards, rather than in a single layer over a wider surface as you would typically curate your back garden. A helpful thing to note here is that not all plants are suited to vertical farming – fast-growing, smaller plants such as lettuce, strawberries and herbs might be a useful starting point, especially if you’re looking to build an edible vertical garden. You can find a list of plants best suited to take your greenery to new heights here!

Whether you’re looking to start investing in climate winners or reduce food waste (or both!), there’s no shortage of environmentally conscious choices we can make to fuel our financial futures. A great place is to start is to get the conversation going – speak to a qualified financial advisor about your investment decisions if you’re feeling lost, and share your (ethical) money wins with friends and family.