March is officially B Corp month! And this year, we’re marking the occasion with a purpose-driven call to (climate) action for the entire mortgage industry…
For better or worse, Australia's financial sector is undeniably powerful. It has the capacity to shape the country's entire economic landscape, as well as influence the financial, and by extension overall, wellbeing of millions of people and their families. Working in the industry comes with an enormous amount of responsibility, and while it can sometimes feel like there are many who set out to abuse this power and privilege for personal gain, there’s an ever-growing movement of people, businesses and institutions who instead, are taking the responsibility seriously and to heart. Those who, through a purpose-driven transformation of their own business models and practices, are attempting to redefine the role that finance currently plays in our society by committing to harnessing its power and influence for good.
Enter: the B Corps. An over 7,800 strong global community of businesses that, via an independent, third party certification process, have committed themselves to striking a better balance between purpose, people, planet and profit. And while finance mightn't be the first industry that comes to mind when we talk about ‘purpose driven’ business, that enormous responsibility we spoke about earlier? That’s exactly the reason it should be.
B Corp Month 2024: This Way Forward
Every year in March, the community comes together for B Corp Month and, via a month-long global campaign, shares stories, ideas and insights on how B Corps are changing the very foundations of what it means to do ‘good’ business. And, perhaps more importantly, demonstrate to the wider business community that not only are B Corp businesses surviving - they are thriving.
As a B Corp ourselves, we’ve spent the last few weeks joining the celebrations and reflecting deeply on this year’s campaign theme - ‘This Way Forward’ - which invites us all to see B Corp certification not as a destination, but as an invitation to join the journey to better business. To be constantly challenging ourselves to do, and be, better and in the process, bring as many people as we can along for the ride.
Given the state of things, it’s a timely and compelling message. And one that we think has the potential to catalyse an enormous amount of positive change for people and planet. Particularly if it were applied, more broadly, to the entire financial sector.
Which got us to thinking…
Mortgage broking: An untapped resource for climate action?
As a purpose-driven mortgage brokerage, we’ve long been passionate about making the world of finance a more ethical and equitable place and harnessing the power of people’s mortgages as a wellspring of opportunity to do good - for our clients, our community and our planet.
Over the years, we’ve supported hundreds of people to better navigate the highly saturated, jargon-filled, greenwashed maze that is home loans and, wherever possible, helped guide them towards a loan (and bank) that better aligns with their values. Through education and advocacy, we’ve worked to combat the pervasive idea that ethical home loans are more expensive, more ‘risky’ or lower quality, diverting millions of dollars in loans away from fossil fuel exposed lenders. Additionally, via our impact giving commitment, we’ve put almost $38,272 of our revenue (and counting!) into the hands of grassroots climate activists and environmental organisations, all working tirelessly to safeguard our collective futures.
But what if the entire mortgage industry were to adopt a similar approach? We’ve all heard the calls asking us to switch our superannuation and other investments to more ethical and sustainable institutions but, what about our mortgages? What kind of impact could be affected if, en masse, Australia’s mortgage brokers decided to take up the fight for climate action and harness their significant power and influence in the home loan space, for good?
Well, in honour of B Corp month, let’s take a look! This way forward...
But first, some numbers
It’s no secret that property ownership is a big deal in Australia. Though, what was once recognised as a cornerstone of the ‘Great Australian Dream’ is fast becoming attainable only to those with a generous income or access to generational wealth - or both. (But, that’s a conversation for another time…)
Australia has one of the most expensive property markets in the world, with an annual salary of $293,578 now needed just to afford a home in Sydney/Eora. What this also means is that, as a nation, we have a considerable amount of property related debt - some of the highest levels in the world.
In fact, residential mortgages are a significant investment for Australian banks, with the ‘Big Four’ major banks holding a diabolical 70% of the mortgage market share. In 2023, the Commonwealth Bank of Australia (CBA) and Westpac Banking Corporation (Westpac) were the leading mortgage providers by value of gross mortgage lending and accounted for roughly 26 and 21 percent of gross mortgage lending respectively. We think it’s important to also highlight here that both CBA and Westpac are currently two of the most heavily fossil fuel-exposed banks in Australia, with CBA’s investments totalling $15.8 billion and Westpac’s at $9 billion since 2016. Both banks loaned $267 million and $1.7 billion to fossil fuels, respectively, in 2022 alone.
Now, here’s where things get interesting. For the 2023 September quarter, a staggering 71.5% of all new residential home loans in Australia were originated by a mortgage broker, equating to $93.83 billion in loans. That’s $93.83 BILLION in loans, in only one quarter. (See where we’re going?...)
It’s an eye-watering amount of money. But more importantly, it’s also an incredible opportunity for positive climate action. Because if mortgage brokers were integrating a ‘clean money’ screening process alongside their pricing considerations with clients, then as an industry, we could potentially be using that $93.83 BILLION per quarter to send a message to the banking sector that is too loud (and too costly) for them to ignore: clean up your act, or people (with the help of their mortgage broker) will take their home loan business elsewhere.
Should mortgage brokers become the new climate activists? We think so.
According to the RIAA’s 2023 From Values to Riches Report, we can see that some of the top barriers people encounter when switching to an ethical bank are things like:
- Not having enough independent information available to them (84%)
- The perception that there is a lack of credible options to choose from (78%)
- The perception that ethical alternatives are more expensive (72%)
- Lack of time to look at options (58%)
As luck would have it, there is actually a group of finance professionals who can help people navigate every single item on this list, free of charge. That’s right - mortgage brokers. With an in-depth understanding of a range of different banks and loan products, a mortgage broker acts as an intermediary between a borrower and the bank when they’re applying for, or refinancing, a home loan.
Additionally, switching to a more ethical bank for your home loan isn't quite as simple as switching your everyday banking. There are a lot of variables that can come into play for borrowers (e.g., self-employed income niches, or buying a studio apartment, just to name a few) and depending on personal circumstances and purchasing goals, these variables can often dictate, or restrict, a borrower's loan options. But again, we think this is just another compelling reason as to why mortgage brokers are so perfectly placed to step into this activist role and play a more purposeful part in Australia’s ‘divestment for climate’ movement.
The whole point of the mortgage broking industry is to encourage competition in the loan market by giving borrowers easy access to a wider range of different loan products - rather than them only getting one option from whatever bank they happen to walk into. Think about it like this: a bank or lender with ‘dirty’ investments would never tell a prospective (or current) customer if there was a cheaper and ‘cleaner’ option for their mortgage at a different bank. But, a broker could! And honestly, considering those previous loan numbers, we think that they should.
The scourge of greenwashing in the finance sector
More and more, people expect the businesses they engage with to behave ethically and play a more meaningful role in creating the positive impact our world so desperately needs. And financial services are absolutely no exception.
As outlined in the RIAA’s 2023 ‘From Values to Riches’ Report, it’s clear that Australians aspire to align their investments with their values and that, crucially, they are also prepared to switch providers if there is a misalignment. The report found that a massive 87% of Australians expect the money in their bank account to be invested responsibly and ethically (a 4% increase since 2022) and that having a super fund, bank or other investment that delivers positive impact in the world is important to 79% of people. The report also found that 76% of Australians would consider moving their super or other investments to another provider if their current fund didn’t align with their own values.
However, respondents also reported that ‘greenwashing’ remains a significant issue for those passionate about making their finances more ethical, with 78% citing greenwashing as a concern, a figure 6% higher than in 2022. Worse still, greenwashing poses an even greater concern among individuals who would potentially start investing responsibly in future, with 80% of those looking to invest ethically in the next 5 years citing it as an issue. A sentiment also shared by those motivated to increase their investments and savings, is if it would make a positive difference in the world (81%).
The prevalence of greenwashing in the finance sector, and the consumer mistrust it feeds, is undoubtedly a huge barrier to bringing the practice of ethical investment mainstream. But, how to tackle it? While the answer is, of course, complex and nuanced, there is one particular course of action that has been steadily gaining momentum in recent years. And the good news is that any financial institution, operating in any part of the sector, can pursue it themselves, right now.
That is: to seek the independent, third party certified, B Corp stamp of approval.
Time for Plan B (Corp)?
For an industry whose livelihood relies almost entirely on its perception of trust, we think B Corp certification is an absolute no-brainer for any financial institution, especially those that are serious about ‘doing better’ and being accountable to their customers and community. Indeed, in the same RIAA report, it was also found that 79% of Australians would be more likely to invest in funds or products that have been labelled as responsible/ethical by an independent source.
We’ve been B Corp certified since 2020 and have found the benefits in certification to be profound and far reaching - for our business, team and clients alike. And while our ultimate goal is for everyone to be able to access ethical, sustainably sourced home loan funding more broadly, having our own independently certified, purpose-led business model has allowed our clients to maintain a level of positive impact, regardless of their lender choice, or until their circumstances permit them to make the more ethical switch.
Of course, B Corp certification is far from a perfect solution. But, to our mind, it presents the entire business community with a practical and tangible roadmap to better business, that anyone can implement, immediately. And right now, the words ‘progress over perfection’ have never felt so urgent.
Curious about some of Australia’s other finance-y B Corps? You can search the B Corp directory here but in the meantime, here are some of our personal favourites:
Bank Australia ↗︎ | Teachers Mutual Bank ↗︎ | Future Super ↗︎
In the best interests of people, planet and back pockets (yes, it really is possible!)
For as long as we’ve been doing this work, there have also been persistent myths surrounding ethical finance options, along with a perception that major banks are somehow ‘better’ or ‘safer’. In reality, this isn't necessarily the case. The big four are often more expensive, they routinely treat their customers terribly and they seem to have little qualms about breaking some pretty big and important laws. As we highlighted previously, they are also more likely to be exposed to fossil fuels and other ‘dirty’ extractive industries. One other thing they all have in common? Astronomical marketing budgets. Go figure.
Ethical banks are, of course, more likely to be ‘divested’ from harmful industries (like fossil fuels) and ‘invested’ in good ones. But in our experience, they are also more likely to treat their customers better, in both the short and long term. Most ethical banks will be customer-owned, meaning that their profits are returned to customers - not shareholders. They are often just as competitive, if not more so, than their major bank counterparts and, even more interestingly, we are in the early stages of gathering our own data that would suggest they also keep their customers' loan costs lower, over a longer period of time. Which means, if you’re looking for a home loan that’s kinder to people, the planet and your wallet - then we’re here to tell you that, actually, sometimes you can have it all.
One last thought here. As mortgage brokers, we are bound, by law, to always act in the best interests of our clients. But, in the face of a rapidly changing climate and the unprecedented, unrelenting environmental disasters occuring as a result, how far should this concept of ‘best interest’ extend? And more importantly, who gets to decide what is, or isn’t, part of the conversation?
As we speak, the government is seeking contributions and feedback on draft legislation that would see mandatory climate-related financial reporting and disclosure obligations imposed on the finance industry. This important move would put us in step with a string of other countries, who have either already passed legislation of their own, or are developing similar requirements.
So, with things already headed this way (legislatively speaking) the question remains: do we, as an industry, act now of our own volition, or do we continue with ‘business as usual' and waste more of the precious time that we, and our planet, cannot afford to.
When it comes to mitigating the worst effects of our changing climate and ensuring we keep global temperatures within a range habitable for human life, our window of opportunity is closing rapidly. We must act decisively, dramatically and fast.
And while we’re conscious of not conflating the importance of individual action over the deep and fundamental systemic change needed to bring about meaningful climate action, it’s clear that this is a once-in-a-generation opportunity (and in our opinion, obligation) not to be missed by the mortgage broking industry. A chance to step up and lead an ethical banking revolution that would see our individual homes play a more influential role in the protection of our collective one - our planet.
We believe it must be #thiswayforward for both our industry and for the safeguarding of our collective futures.
If you’re a mortgage broker, or you work in the industry in some capacity, and you’d also like to see the industry do more for climate action and justice - we would love to hear from you! Send us an email via → info@nullpurefinance.com.au
Any finance information provided in this article is general advice only and doesn't take into account your personal circumstances, needs or goals. You should always reach out to us, or seek professional advice, before acting on this information or making any other financial decisions.