The banking industry has been under pressure in recent years to prioritize environmental, social, and corporate governance (ESG) objectives. As a result, financial institutions have started to focus on climate change, equality, and social justice. One example of this trend is the recent introduction of a tool by C6 Bank, a Brazilian digital financial institution. The tool, called “Carbon Extract,” tracks CO2 emissions from everyday expenses made with debit and credit cards, transfers, and Pix transactions. The bank calculates the estimated carbon footprint for each transaction conducted with the account, and urges customers to compensate monetarily for their emissions.
While the stated goal of such tools is to inspire more sustainable behaviors, there is a growing concern among critics that this is an invasion of privacy and could lead to potential censorship of financial activity. Some claim that these technologies may ultimately lead to transaction censorship and account closures. This concern is fueled by reports of banks globally closing customer accounts without much explanation, as reported by The New York Times on April 8, 2023.
However, supporters of the use of carbon tracking tools argue that this is a necessary step towards a more sustainable future. Several banks and major payment services worldwide have developed tools to measure customers’ transactional carbon footprints. For example, Mastercard has created a carbon calculator tool for this purpose. Moneythor analyzes customer transaction data to estimate CO2 output, while Personetics has developed a customer-based carbon footprint monitoring tool. Bud, an open banking fintech company, offers a carbon emissions tool, and research by fintech firm Cogo suggests that 75% of banking customers desire information related to such data. Digital bank Meniga also argues that banks should provide estimates of their customers’ CO2 output.
The use of such carbon tracking tools is not limited to just Brazil. In May 2022, Garanti BBVA, a bank in Turkey, introduced its carbon footprint tool, which calculates customers’ carbon emissions based on their banking transactions. This tool works in a similar way to C6 Bank’s “Carbon Extract” tool, analyzing the consequences of CO2 emissions into the atmosphere while serving as an indicator for implementing sustainable measures.
Some skeptics believe that these carbon tracking tools are a “preview” of central bank digital currency (CBDC), fearing that the use of such tools could lead to transaction censorship and account closures. However, it is worth noting that C6 Bank and Garanti BBVA are not central banks, and their tools are not CBDCs.
Moreover, the use of carbon tracking tools is not limited to banks. Companies across sectors are increasingly focusing on ESG objectives, such as reducing carbon emissions. For example, Microsoft recently announced its commitment to become carbon negative by 2030, while Google has pledged to operate on entirely carbon-free energy by 2030. These companies are tracking their carbon footprints and implementing measures to reduce them.
In conclusion, while the use of carbon tracking tools by banks is a relatively new development, it is part of a broader trend of companies prioritizing ESG objectives. While there is concern that such tools could lead to privacy violations and financial censorship, supporters argue that they are necessary for a more sustainable future. As more banks and companies adopt such tools, it will be interesting to see how they will impact our financial and environmental landscape.