Earth Overshoot Day was first conceived by Andrew Simms, a regular contributor to The Ecologist and head of the UK think tank New Economics Foundation, and marks the date when humanity’s demand for ecological resources exceeds what the Earth can regenerate in that year.
This means that we have already consumed as many raw materials as the earth yields in an entire year. To continue living like this, we would need three planets rather than one.
This is an untenable situation, and one that is exacerbated by the financial sector. The vast majority of financing decisions do not take planetary boundaries into account, and this has to change.
Every financial transaction has an impact, negative or positive. In the same way that every project, initiative or company has a carbon footprint and contributes to a better world, or not.
The choice that a financial institution makes to provide a loan or to make an investment therefore by definition has consequences for people and the environment.
The reality is that the financial sector has a significant ecological footprint. Consider, for example, investments in fossil fuels: even now, in spite of everything we know about climate change, financial institutions continue to invest more money in oil and gas than they do in sustainable energy.
According to the latest BankTrack report, fossil fuel financing from the world’s 60 largest banks has reached USD $5.5 trillion in the seven years since the adoption of the Paris Agreement, with $669 billion in fossil fuel financing in 2022 alone. Meanwhile, just 7% of energy finance from global banks went to renewables between 2016 and 2022.
These statistics are shocking, and in stark contrast to the lofty commitments and green promises that we read in these institutions’ climate action plans. The fact is, we can’t keep kicking the can down the road.
We need to see much faster action by the financial sector, with disclosure of current emissions, targets and transition plans verified by the Science Based Targets Initiative and regulation mandating this.
In setting out our target to achieve net zero status by 2035, Triodos is challenging not only the broader financial sector, but ourselves. As a bank that has led the way on carbon disclosure and already has a low carbon emitting portfolio, we understand our starting point and we can see the realities of how difficult achieving net zero will be.
There are three key areas in which the financial sector can lead the economic transition to net zero, namely: 1) financing the energy transition; 2) stimulating the circular economy; and 3) making the agricultural sector more sustainable.
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