Money doesn't just sit in savings accounts doing nothing. Banks recirculate deposited cash as loans — for cars, homes, even oil pipelines — and pay customers interest for the service.

Startup Atmos Financial ensures that the money its customers deposit will only go to clean energy projects, rather than funding fossil fuel infrastructure. 

"Banks lend out money, and it’s these loans that create the society in which we live," said co-founder Ravi Mikkelsen, who launched the service on January 12. "By choosing where we bank, we get to choose what type of world we live in."

Atmos is one entrant working at the intersection of two broader trends in finance: the rise of fintech, in which startups compete to add digital services that traditional banks lack; and the movement to incorporate climate risk and clean energy opportunities into the world of finance. Climate fintech takes aim at the historical entanglement between major banks and the fossil fuel industry to create forms of banking that don't lead to more carbon emissions.

"It’s a space that’s starting to see more activity," said Aaron McCreary, climate fintech lead at New Energy Nexus and co-author of a recent report on the sector. "They’re picking up customers. They’re offering products and services that aren’t normalized in Bank of America or Wells Fargo."

Banking for clean energy

Atmos itself is not a bank, but it works with banks. When a customer signs up, Atmos passes the money to Evolve Bank & Trust, an FDIC-insured institution. Atmos then uses the deposited money to lend to utility-scale solar plants. Atmos works with counterparty banks to source deals today, but it is building its own pipeline of projects to lend to.

The lending will expand to other forms of "climate-positive projects at scale," such as regenerative agriculture and electrification, Mikkelsen said. Atmos plans to launch its own lending program for rooftop solar this summer, vetting borrowers directly and through partner organizations. The company launched with backing from impact, fintech and cleantech investors, including author and futurist Ramez Naam.

Atmos customers are given access to a bank account with FDIC protection up to $250,000, no monthly fees, no minimum balance and freedom to withdraw their funds whenever they feel like it. But while other banks offer such perks, Atmos hopes to differentiate itself on the mission.

"Don’t put your money in banks that fight what you do," said Mikkelsen.

It doesn't hurt that interest rates on Atmos savings accounts range from 0.41 percent to 0.51 percent, depending on the account balance. Those rates include a 0.11 percent bonus for customers who set up a monthly donation of any amount to one of the climate nonprofits on the platform. With or without that bonus, that's a significantly higher rate than many legacy banks. Other online-only "neobanks" offer similarly high rates. 

Atmos pays that higher rate for customers based on the proceeds from lending money to solar projects. It also takes a margin, just like banks do when they lend to someone. In effect, that's the price for connecting regular people with large-scale energy deals that they wouldn't be able to lend to as individuals. This structure yields a low cost of capital for solar financing, Mikkelsen said.

Deposits in Atmos lead to investment in clean energy projects, but the service does not currently offer investment vehicles for its customers. That means that their money is shielded from the risks of investment but cannot generate commensurate returns.

The company plans to add commercial banking and investment products in the future, Mikkelsen noted.

The growing ecosystem of climate fintech

Mikkelsen said the user base has been "growing quickly" since launch, though he declined to share exact numbers.

Asked what kind of scale he hopes to reach, he pointed not to an internal growth projection but to the 2018 report by the U.N.'s Intergovernmental Panel on Climate Change, which called for trillions of dollars in global investment annually to put humanity on a path to avoiding extreme climate change. Governments can muster that kind of money — if they choose to do so. But the banking sector can too.

"We have the potential, with our money, to reach this scale," Mikkelsen said.

A cohort of entrepreneurs agrees with that assessment, including: 

  • German neobank Tomorrow promises to "use your money exclusively to invest in sustainable projects." It offers a premium account that offsets the carbon impacts of the customer's purchases, and a debit card that replaces the typical plastic with "cherry wood sustainably grown in Austria." Tomorrow partners with Solarisbank to hold the money, while Tomorrow handles the customer relationships and lines up the sustainable investments.
  • French company Helios similarly partners with Solarisbank and prints its debit cards on cherry wood. It pledges to share exactly which projects get funded from savings deposits, all of which must contribute to the energy transition rather than threatening the environment.
  • Los Angeles-based Aspiration promises not to use deposits to support "fossil fuel exploration or production." Customers can choose to round up their purchases to plant a tree. The company also manages investment and retirement funds committed to fossil-fuel-free, sustainable companies.
  • Amalgamated Bank operates with net-zero emissions and applies deposits toward "sustainable organizations, progressive causes, and social justice." It says it lends hundreds of millions of dollars annually to solar projects. It offers personal, commercial and institutional banking.
  • Carbon Collective offers investment portfolios that weed out fossil fuel companies, resulting in diversified investments across sustainable sectors of the economy. Investors can put their money into an "index" of companies committed to low-carbon activities, including utilities, materials and power providers.

"Neobanks don’t have that deep intermingling with the fossil fuel industry, so it’s much easier to decouple," McCreary noted. Legacy U.S. banks, on the other hand, have a history of intertwined relationships with the fossil fuel industry. Pulling back from lending to new business threatens those long-standing client relationships.

Next step: Push the big banks

Analysts tracking the flow of capital to fossil fuel projects say it would be hard to overstate the role the banking sector still plays — especially in the United States.

The Rainforest Action Network's annual report in 2020 found that, since the signing of the Paris agreement in 2015, 35 private banks provided $2.7 trillion in loans and underwriting to fossil fuel companies. Total financing increased each year since 2015. JPMorgan Chase tops the chart for total fossil fuel financing in those years, leading runner-up Wells Fargo by 36 percent, according to the analysis.

"If the Paris Agreement was this big, landmark, world-changing event, someone failed to let the biggest banks in the world know," said Justin Guay, who tracks energy finance as director of global strategy at the Sunrise Project, an international clean energy research and advocacy group.

Cutting off the flow of debt financing or bonds, he added, would go a long way to slowing the pace of new fossil-fuel project construction.

The young climate fintech companies are not yet big enough to supply this deluge of capital on their own. But Mikkelsen anticipates a carrot-and-stick situation for legacy banks. Jumping on the climate finance trend will attract or retain customers who care about it. Refusing to prioritize clean energy lending, or putting customers' money to work for fossil fuel projects, will increasingly send customers elsewhere.

"It’s exciting to see people come and say, ‘This is what I’ve been waiting for. I work in clean energy; I work to stop climate change; I want my money to do the same thing,’” Mikkelsen said.

Historically, personal banking has been quite sticky: Someone opens a savings account with a bank and holds onto it for decades. Climate fintech banks can compete for new customers while appealing to the sustainable aspirations and technological savvy of people coming of age now. But they can also pry away existing customers from the big banks by clearly differentiating themselves.

"[At] do not have any option for ring-fencing your money and saying it’s not allowed to touch this evil stuff," Guay said.

If enough customers start demanding climate-positive savings, that could get banks' attention, just like investor pressure to align with the Paris Agreement has shifted the financial sector's approach to climate risk.

"Fossil fuels need banks, but banks don’t need fossil fuels," Guay said.

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