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Apr 29, 2021

What Are Your Bank Deposits Actually Funding?

There are 5,010 FDIC-insured banks in the US, and each has a slightly different view when it comes to loan portfolio composition. Some steer clear of hospitality industries (casinos, hotels, etc.), for example, while others lean into professional services industries or nursing homes or airlines. The sectors and loan types each bank supports is based on the types of businesses and historical relevance for that bank’s service area, as well as the experience of their employees. 

Consistent across most banks is their reliance and support of real estate. 

Banks lean heavily on real estate lending 

Based on a recent survey of banks that make up 10% of the total deposits in the US, direct real estate lending and real estate-related services comprised on average nearly 50% of their aggregate loan portfolios as of December 31, 2020, roughly $550 billion in total. There was a relatively wide range between the banks reviewed, with real estate concentrations as high as 80% and as low as 35%. Real estate included mortgages to commercial buildings, construction lending, multi-family complexes, residential mortgages and home equity lines of credit. 

While the banks reviewed for this analysis are among the biggest in the country, it is highly likely that similar trends exist across the industry, including both community banks and large international money centers. The banks reviewed were Regions Financial Corp, Huntington National Bank, Fifth Third Bank, Capital One, First Republic Bank, US Bank, PNC Bank, and Bank of the West. 

None of the banks reviewed referred to the energy-efficiency of the buildings they financed, and it is safe to presume that LEED or other energy-efficiency qualifications are not a prerequisite to funding. 

Other commonly cited loan concentrations included auto loans, credit cards, equipment leasing, and lending to businesses commonly categorized as ‘Commercial and Industrial’. Commercial and Industrial lending is a comprehensive term inclusive of most sectors and industries of the economy, from oil & gas services (“energy”) to manufacturing, to financial services. 

What is the carbon intensity of bank loan portfolios? 

Across all sectors of lending, bank disclosures were generally silent with regards to the carbon intensity of the industries supported as well as detail on the industries themselves. While many banks are starting to distance themselves reputationally from politically sensitive sectors such as oil & gas, there has yet to be any recognition that other sectors also play a crucial role in reducing emissions. 

The buildings sector, for example, is generally understood to contribute up to 40 percent of global carbon emissions. With bank portfolios so heavily vested in the built economy, the carbon impact of their portfolios is significantly higher than they are acknowledging. Banks are indeed among the greatest enablers of greenhouse gas emissions, and are the best positioned to address the issues. 

According to a recent report from CDP, the greenhouse gases emitted by banks’ lending activities was 700x that of the direct emissions of the banks themselves. The need to decarbonize entire portfolios has never been so urgent. Coalition-building industry groups like PCAF are making slow progress in building consensus around carbon accounting for bank portfolios. 

Using your bank deposits to solve climate change

Personal action is an incredibly powerful tool that has the potential to catalyze industry-wide change. Atmos brings greater values-alignment to an industry that severely lacks customer accountability. Atmos commits to using 100% of its customers’ FDIC-insured deposits towards enabling climate-positive infrastructure and pledges to provide a completely transparent portfolio and carbon accounting methodology to make net-zero a profitable reality for more people. Atmos offers no-fee, high-rate online savings accounts that can be added to any customer’s existing bank mix.

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