Did you know that Bank of America (BofA) has the official job position of a global environmental executive? Currently filling it is Alex Liftman who thinks climate change is such a serious issue that business-as-usual practices must be abandoned in order to establish sustainability in all areas of life. However, that doesn’t mean economic incentives should be abandoned. In a different turn, Liftman argues sustainability solutions can drive growth.
Climate Change is the New Framework
Everyone knows that when you enter a certain space you must play by the rules of the dominant players in that space. Although many don’t wish it to be true, the economic sector is entirely dominated by giant banks, and investment and asset management groups. One would be prudent to take a very close look at the playing framework they are meticulously constructing. And that framework is considered by some to be Climate Change.
Climate Change has been in the news for many decades under different brands. In the 1970s it was Global Cooling, then the Ozone Hole, the Acid Rain scare, more recently Global Warming, and now the latest re-branding under the all-encompassing Climate Change. As climate computer models have a sordid history of being highly inaccurate, some remain suspicious over the latest set of claims. However, no one can deny the heavy toll of an increasing population and pollution on the environment.
Carbon Credit, Carbon Neutrality, Sustainability
Prepare to hear those terms a lot in the coming years. BofA is already ahead in the Climate Change game. As of this January, BofA revealed that it achieved carbon neutrality a year before the deadline set by their internal corporate structure. They did this by buying 100% of their electricity from renewable energy sources, reducing location-based emissions by 52%, and buying verified, third-party carbon credits for those emissions that couldn’t have been avoided.
Furthermore, BofA’s Environmental Business Initiative (EBI) funneled $145bn into low-carbon businesses and organizations, which will be topped with another $300bn to last until 2030. This is becoming the norm, as other global financial institutions are pushing sustainability policies, like BlackRock and Goldman Sachs. Not to be left behind, Microsoft even launched a Sustainability Calculator so that IT professionals can gauge the environmental toll of their infrastructure. Stripe, as a FinTech payment processor, went the route of balancing the carbon footprint by investing at least $1million per year in carbon negative activities.
Orders Will Come from the Top
A growing trend among investors — millennials especially — is Socially Responsible Investing (SRI). Through SRI, investors are able to invest in companies that take action in decreasing their negative impact on the environment. Stock trading apps such as Stash and even robo-advisors Betterment and Personal Capital all provide some form of SRI.
FinTech startups and established businesses would be wise to read between the lines of Mike Corbat, chief executive of Citibank. In his address at Davos’ World Economic Forum, he couldn’t have been clearer:
“I don’t want to be the sharp end of the spear, meaning I don’t want to have to be the one telling [companies] or enforcing standards in an industry or business… We don’t want to find ourselves being the person that dictates winners and losers. A bank’s job is to support the communities in which it operates. It is not to dictate outcomes.”
Meaning that it is up to FinTech startups and other businesses to take note of the prevailing trends, in order to avoid unpleasant actions from taking place. In essence, if your business is deemed as “polluting”, based on their criteria and calculators, certain constraints and negative incentives will be imposed. In fact, we witnessed a perfect example of such agenda-setting from Goldman Sachs earlier this year. Only time will tell if the sustainability drive will benefit society at large, or further impose constraints that only large corporations can absorb.
Are you worried that the increasing power of banking institutions and asset management groups like BlackRock will be abused under the guise of sustainability? We’d like to know what you think in the comments section below.
Image courtesy of BofA.