The Bankwatch

Tracking the consumer evolution of financial services

Carbon neutrality for Banks and Credit Unions is a hard question

Banks and Credit Unions are getting all green over the last two years, and it risks becoming a fad.

I was surprised to see VanCity, whom I respect using what appears to be shadow accounting to accomodate a claim of carbon neutrality.

I have to call VanCity out on this one. Using a ‘Social Audit’ they have calculated their degree of carbon usage. No problem there. In order to become carbon neutral, they have purchased ‘offsets from five alternative energy projects’. Huh?

Vancity – Carbon Offsets

Vancity carbon neutral offsets

After all of this prep work, the time came for us to actually offset our emissions for the first time. We engaged The Pembina Institute, an environmental non-profit full of top-drawer experts to source offsets for us using the criteria outlined above.

They, in turn, worked with Offsetters.ca to purchase offsets on our behalf. Pembina and Offsetters were able to source half of the offsets we required from five alternative energy projects in BC (ground source heat pump projects to be specific). They sourced the other half from Climate Care in the UK. All of the offsets were verified by a third party, and our offset purchase was audited by our social auditor.

I get the whole desire to appear carbon neutral, but lets not lose touch with reality. The organisation is carbon negative by definition. Paper, people, computers are all carbon users, and that wont change. This can be reduced, and managed. But to claim a fiction by adding something to a “carbon balance sheet” to make yourself carbon neutral is ridiculous.

Every Bank could do that same thing, and I ask … would the world be safer, and less prone to climate change?

Written by Colin Henderson

April 12, 2008 at 23:46

Posted in Business Models

15 Responses

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  1. Yes…

    It sends money to fund various (often expensive) carbon-emission offsetting programs, shifting their economics to the point of becoming cash-flow positive (or a quicker payback period).

    As a result, more of these projects get built, and that means less carbon emissions.

    As an aside, I definitely think that heat pumps are the heating and cooling method of the future…

    Dan

    April 13, 2008 at 12:48

  2. @Dan Totally agree with the validity of the investments, and taking credit for them.

    What I disagree with is the notion of making the organisation “carbon neutral”

    Colin

    April 13, 2008 at 21:40

  3. Colin, I’ve gotta disagree – Vancity isn’t perfect, but they’re sincere. This isn’t slapping a “green” logo on electronic statements, which I’ve seen many FIs doing.

    From their site, “Over the last 10 years, Vancity cut its energy use by 50 per cent, incidents of staff commuting to work by driving alone by 13 per cent, and its paper consumption by 30 per cent saving well over $2 million in energy costs alone.”

    Sure, you can call “carbon neutral” as an impossible standard to achieve, but we know what they mean – that for the damage to the environment from being in business they’re trying to erase that by doing that much good.

    You ask, “Every Bank could do that same thing, and I ask … would the world be safer, and less prone to climate change?” No matter what the answer really is, you can’t fault Vancity for trying. And I believe they’re making an honest attempt.

    Trey Reeme

    April 14, 2008 at 09:47

  4. @trey … directionally it is absolutely the right thing to make those investments. My only issue lies in the descriptor “carbon neutral”. I love what VanCity are doing by encouraging green actions throiugh focussed groups, products, sponsorships and a host of other activities.

    But I wonder at the notion that a bank can be carbon neutral. If all Banks turned around, and made similar investments, yes the world is better, but those organisations in that example (not necessarily VanCity), are still using too much paper, blowing millions in inefficient data centres, employees travelling when a tele/video conference would do, etc etc.

    What if Bank of America plunged a few billions into such investments just because they can afford it? Are they carbon neutral? I dont think they are anything like in the same class as Vancity.

    So I worry that the notion of an easy out on carbon neutrality would paper over the underlying problems.

    Colin

    April 14, 2008 at 10:16

  5. BofA pulling a Vancity would require many years of top-down commitment to change – just like Vancity demonstrated. I’m not holding my breath for any big player to do that, but if they did, it’d be awesome. I hope someone else does.

    I think you put it best: “directionally it is absolutely the right thing to make those investments.”

    Trey Reeme

    April 14, 2008 at 10:29

  6. Colin, I don’t understand the issue you are taking with VanCity… or anyone else that claims carbon neutrality through the use of offsets.

    To achieve Carbon Neutrality is almost impossible… doing anything… the notion of Carbon offsetting both negates the carbon output of an organisation or person, while at the same time effectively creating a voluntary ‘tax’ on carbon output (when you offset, it costs you to create carbon).

    To have a cheap swipe at a company that is voluntarily putting their money where their mouth is, and actually doing something rather than just talking about it… well… it’s just a cheap swipe, and your readers will see through it.

    We should be praising institutions like Vancity for taking a top down approach, and seriously addressing the issue of carbon output… and heck, if they want to claim ‘carbon neutrality’ then why the hell not?

    So yes, I feel that you’re getting old, and I’ve called you out…

    james

    April 14, 2008 at 20:59

  7. @James …. I used an expression that is quite common in English, and not meant to be taken as a serious expression of age, so “thank you” for taking advantage of that.

    You mention that you don’t understand. I made my point about carbon neutrality. I have been consistently praising of VanCity for years, but you may not know that, since you obviously chose not to read the full thread.

    “I love what VanCity are doing by encouraging green actions through focussed groups, products, sponsorships and a host of other activities.”

    I note you have not backed your comments, and left yourself anonymous. unlike the others here who did identify themselves in the discussion.

    Colin

    April 14, 2008 at 23:02

  8. @ Colin…

    Where I work for is of no consequence to the discussion at hand. You have my name, and my email (which would give you an indication of my last name, too), so that’s enough. I don’t work for Vancity, but I do work for a credit union. That’s enough information for you.

    I suggested that you, are in fact, getting old as you seem to be pretty cynical of the whole ‘carbon neutral’ principle. Cynicism, I would suggest, is a symptom of getting old.

    Nevertheless, as an Economics graduate, Carbon Neutrality through a ‘Carbon Balance Sheet’ seems a perfectly sensible concept to me… as it does to plenty of other pro-active individuals and corporations around the world. It’s nigh on impossible to get carbon emissions down to zero, for both individuals and businesses, at least in the short term. The individual/firm gets that nice feeling of knowing they are doing the right thing, their behavior changes because they are now paying for their emissions through the offset, and the environment grins too.

    Now here is what I don’t understand: What is not to like… What is your point? The whole semantical point that Vancity isn’t Carbon Neutral, that they actually emit carbon (you reffered to them as carbon negative but I would suggest they are carbon positive…)… Well, no s**t sherlock!

    james

    April 15, 2008 at 00:15

  9. Hi Colin and James. I wasn’t going to get into this, partly because I’m at a conference, and partly because I’ve been enjoying reading this thread. But at this point, I want to step in.

    First let me say that I have the utmost respect for Colin. He’s a prince among men, and if he exemplifies anything, then I have nothing to worry about with aging.

    I understand his point, but agree with many of the posters that in the end being carbon neutral unfortunately includes offsetting most of the time. I won’t get into how Vancity offsets its carbons, but it is pretty amazing, and takes it to the next level. This is something Vancity did remarkably well, and deservedly won the admiration of David Suzuki, who does not normally endorse companies.

    James, I really appreciate your point of view and passion, but I just wanted to say that I am uncomfortable with the way the comments are heading. It’s an important issue to explore, one I’d like to do without name calling.

    William Azaroff

    April 15, 2008 at 00:34

  10. @William … Thanks for the balanced answer, and you know the respect is mutual. Nice to see some people can maintain their class. I think peoples comments and method of explaining their views says a lot about them as people. Cynicism, I would suggest, is a symptom of nothing but a closed mind. 🙂

    Colin

    April 15, 2008 at 00:58

  11. @ William & Colin:

    Yep, I got hot under the collar. I’m not too stubborn or hot-headed to admit when I’m wrong, so apologies for getting stuck into you Colin.

    @ Colin:

    My points still stand, though.

    I would still like to know exactly what your gripe with going Carbon neutral through the use of offsets… by basically implementing a Carbon Balance Sheet (as you put it).

    You haven’t touched on that in either of your responses, and that was my main gripe with your initial post and subsequent responses.

    james

    April 15, 2008 at 01:28

  12. Wait, wait, wait …. I thought I’d comment on this. I dont get how someone who thinks about nature, eco and carbon usage would consider age a factor. Its uncomfortable for everyone. What happend to the carbon, and whats that got to do with age?

    Frank

    April 15, 2008 at 01:31

  13. Two points:

    1. I don’t think “carbon neutrality” is any more an accounting fallacy than “balanced budget” is. If I have $0 in the bank, owe $1000 and am owed another $1000, I can claim a balanced budget, but I can’t claim to be debt-free. VanCity isn’t claiming to be “carbon-free” in this case, just neutral.

    2. I think VanCity would have less to be proud of if they didn’t combine the carbon offsets with efforts to reduce, reuse and recycle, but as far as I know they have.

    Dan Dickinson

    April 15, 2008 at 09:50

  14. @ Dan

    What a great dialogue! I manage Vancity’s environmental programs and wanted to say Dan that your last post is spot on. In my experience, Vancity’s Carbon Neutral goal has given our organization permission to invest in the opportunities that reduce more emissions in total than we could through focusing on internal reductions alone.

    Here’s why:

    Each year we carve out a budget to fund projects that reduce our emissions. We spend that money until it’s gone. We prioritize projects based on their cost benefit ratio and invest in projects with the most favourable ratio first.

    So without a carbon neutral goal, our investment options in any given year may look something like this:
    Project Cost of reducing emissions by one tonne: Tonnes available to reduce: Capital investment required:
    Internal Project A $10 100 $1,000
    Internal Project B $200 100 $20,000
    Internal Project C $3000 100 $300,000

    In this example, if our total budget for the year were $250,000 we could reduce 276 tonnes of emissions

    With a carbon neutral goal, our investment options may now look something like this:
    Project Cost of reducing emissions by one tonne: Tonnes available to reduce: Capital investment required:
    Internal Project A $10 100 $1,000
    Internal Project B $200 100 $20,000
    Internal Project C $3000 100 $300,000
    Offset Project A $10 100 $1,000
    Offset Project B $200 100 $20,000
    Offset Project C $3000 100 $300,000

    In this example, if our total budget for the year were $250,000 we could reduce 270 tonnes of our own emissions and fund an additional reduction of 200 tonnes of emissions through offsets, for a total of 470 tonnes of emissions reduced. (The data provided here is fictional by the way, but does give you some sense of the wide range of cost per tonne for various emission reduction opportunities.)

    Our carbon neutral goal essentially gives us permission to invest in those projects that have the greatest total emissions reductions with the dollars available.

    Of course there is a huge caveat here. This only works when an organization is approaching this work from a place of integrity and only considers high quality carbon offsets in its decision set. Certianly there is an arbitrage opportunity that exists here for organizations that want to take advantage of it. Our intention in our carbon neutral work is to show that it is possible to achieve ‘neutrality’ with integrity. We feel that we’ve done that and our community partners, verifiers, and auditors agree. Hopefully you do too.

    Hope this helps to explain the ‘why’ behind what we’re doing. Keep the dialogue going! It’s so needed in this space.

    Amanda

    April 16, 2008 at 12:08

  15. @Amanda .. thanks for the thoughtful and complete post. No doubt VanCity have given this much thought and consideration, and I continue to applaud the actions at VanCity.

    As I mentioned, I hope other Banks do not simply pick up on the ‘carbon neutral’ moniker without building it into their business model as you have clearly done.

    Colin

    April 18, 2008 at 10:50


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