Green Banks VS Environmental Banking

Taking part in the environmental banking, or green banking, movement is not a political stance. Climate change is not a talking point to be owned by the liberal nor conservative parties. Simply put, environmental banking just makes good common sense for everyone of all ages and viewpoints.

This article explores the different roles of state- or nationally-sponsored 'Green Banks' and the emerging class of environmentally-focused, socially-responsible banks. We'll review the market opportunities for these different institutions. Finally, we'll review the best environmental banking alternatives available for safekeeping your money.

What is a Green Bank?

The concept of Green Banks are starting to gain more attention on the national and international stage as policymakers are seeking innovative ways to reduce the nation's emissions. So what is a Green Bank anyway?

Green Banks are public, quasi-public or non-profit entities that are publicly capitalized (i.e. funded with tax dollars) to facilitate investment into underserved green and resilient financing markets. Though they may differ in size, mandate and scope, a Green Bank refers to a specific type of entity. There are just 21 Green Banks currently in the nation. According to the Coalition for Green Capital, government officials and local leaders in 22 states are exploring or taking steps to form new green banks.

Green Banks typically have more latitude to finance projects than traditional banks might have, which makes them unique entities for filling current financing gaps, especially as it relates to green investment. Since Green Banks are funded with tax dollars and do not have direct customers, they are free to make investments that fit their mandate even though those investments might be deemed higher risk.

Traditional banks and other customer-facing banking services providers, on the other hand, must regularly meet OCC-mandated safety and soundness tests involving credit, liquidity, legal and interest rate risks. The OCC regulates these entities to guard against bank failure and loss of customer money due to economic cycle or poor bank management. That same rigor of testing doesn't occur for a Green Bank.

Another way to think of the difference between a Green Bank and an environment bank is this:  You can not deposit your money with a Green Bank while you can deposit your money with a bank that has green (environmental or sustainable) business practices.    

What is Environmentally Banking or Socially-Responsible Banking?

Environmental, sustainable or socially responsible banking is an emerging but familiar concept in banking markets around the world. Different from Green Banks that are publicly funded (see above), these environmental, sustainable or socially-responsible banks make loans from customers' deposits.

If you're thinking to yourself, "Isn't that what a normal bank does?", well, you're absolutely right!

An environmental, sustainable or socially-responsible bank operates in the same way to thousands of other banks around the world. The primary difference between an environmental, sustainable or socially-responsible bank and your traditional wall street or main street bank is that the organization is ALSO purpose-driven – so many of the business loans, personal loans and deposit products from that bank are often purpose-driven as a result.  

These institutions, which see themselves as part of a larger economic and social system, are often referred to as having a "Triple Bottom Line". Triple bottom line companies hold themselves to a higher standard, measuring their success based on positive outcomes for all stakeholders (people), planet, and profit rather than profit alone.    

This type of bank enables customers - whether they be retail banking, commercial banking or institutional banking customers - to choose how their money is used in the world.

If a customer, for example, didn't want their money used to exacerbate climate change by financing the fossil fuel industry, an environmental bank would be a great way to take personal action and support the green economy. If a customer wanted to ensure their money was used to support underserved communities, a socially responsible bank could be a great path. These banks are often separate from each other as we'll learn in the next section.  

Are all Environmental, Sustainable or Socially-Responsible Banks the Same?

This is a common question. The answer is:  Absolutely not.

Every bank tends to have its own operating formula. The types of products and services a bank offers and how it lends money generally depend on its mission as well as its own ability to generate business opportunities. Some banks may promote online banking with paper free statements, retirement accounts or checking accounts, while other banks lean into small business or mainstream commercial banking. Not surprisingly, the amount of positive change an environmental or socially-responsible bank might have is dependent on these core products.

Many banks and big banks like to celebrate themselves as leaders of ethical policy, but their track record might tell a different story.  The most important thing to remember when it comes to assessing the impact of one bank versus another is to review their lending policies and business practices. Not supporting the fossil fuel industry might be a great step if you want to ensure your money is doing no harm, but it's also important to look at whether it is actively pursing positive impact.

If you're looking to find the right environmental, sustainable or socially-responsible bank for you, you'll want to find one that offers all of the basic services you need while creating the maximum amount of positive impact in the world.      

How to Find the Right Ethical Bank for You

The two most important factors are understanding what products you need from your banking services provider, and identifying what impact you want your money to have on the world. Look also for banks that have no or minimal fees, as these types of banks support equitable and inclusive access to financial services. Let's look at some of the most well-known environmental or socially-responsible banks and compare how they are different.

Atmos

Atmos is the new kid on the block in comparison to others on the list, but punches well above its weight class when it comes to sustainability. Atmos is a pending B Corp, offering an award-winning personal banking experience for its FDIC-insured retail deposit account holders, while delivering nationally leading savings yields and features designed to democratize climate action broadly across its customer base. Amazingly, 100% of its customers' deposits are used to support climate-positive infrastructure; and Atmos reports the impact of each customer's account by measuring the emissions avoided through its renewable energy portfolio. Atmos seeks to tackle the climate crisis by exclusively lending into the green economy and reducing the carbon footprint of its customers.  Primary customer emphasis and value proposition:  climate-positive, high-yield savings, digital retail banking.      

Beneficial State Bank

Beneficial State Bank is a community development financial institution (CDFI), Certified B Corp and Global Alliance member based out of Oakland, CA. With a handful of branches on the west coast, Beneficial State Bank focuses on serving under-banked communities and individuals, small business banking and nonprofits. While less than 5% of Beneficial State Bank's loan portfolio is focused on climate as of 2022, it leans heavily into its primary industries of affordable housing and nonprofit banking. Primary customer emphasis and value proposition:  ethical banking for the underserved and small business, community development financial institution.

Clean Energy Credit Union

Clean Energy Credit Union (CECU) is a CDFI based out of Colorado. As "member owned" co-ops, credit unions are usually a great option to support local economies and trade associations. Though these institutions may very well be socially responsible, they rarely have much to do with the environment. Clean Energy Credit Union is the rare exception that combines its nonprofit structure with support for the green economy. It supports a variety of renewable energy initiatives by lending into solutions like residential solar, geothermal, and e-bikes. Credit unions have historically had less functional apps and cumbersome technology solutions.  Primary customer emphasis and value proposition:  green economy, co operative bank or credit union.

Amalgamated Bank

Amalgamated Bank is a Certified B Corp and GABV (Global Alliance for Banking on Values) member based out of New York, NY. Its primary operating footprint includes New York, Washington D.C. and San Francisco. Amalgamated has been a bank for unions in the United States for over 100 years and has a variety of old legacy products designed to support unions and their members. Generally speaking, Amalgamated has not historically focused on environmental issues and instead focused on socially-responsible initiatives, such as unions and banking for the Democratic political party. Primary customer emphasis and value-proposition:  traditional commercial banking.

Why is Banking Important?  

Banking is an often overlooked method for change in the world. When you put your money in a bank, your bank doesn’t just let it sit there. That money is invested or lent out to businesses, individuals and projects around the world that make a financial return for that bank. Choosing where you bank determines how your money is used.

Many banks in search of maximizing profit lend that money to companies with a history of human rights infractions or environmental degradation. If you're wondering why major companies can afford to drill for fossil fuels or displace marginalized local communities, you don't have to look any further than many of the largest banks around the world.  

Of course, these issues will not be resolved entirely by a resurgence in ethical banking, but a reallocation of capital around the world will certainly help to create greater equity among all people and slow the impacts of the climate crisis.

Luckily, it’s easier than ever to find the right sustainable bank or financial institution that aligns with your personal values.  

In Closing

The concept of green banking doesn't typically refer to Green Banks. Instead, this term refers to sustainable banks or a socially responsible financial institution that is seeking to create positive change and environmental impact.

There are several banks that are starting to excel in green or socially responsible services that give customers the power to make direct change in the world. Whether you are looking to align your personal banking and financial self with a new checking or savings account or ESG/SRI retirement funds, or open a new business banking relationship for a business, there are a variety of options for you to explore.  

The emergence of online banking in particular has brought an increasing number of banking options  to consumers and companies around the world that are targeted against fossil fuels. Finding a bank or credit union that supports your environmental values has never been easier.

New digital offerings like Atmos are offering innovative services that allow customers to conveniently align all of their money with climate action and environmental values while earning better returns than big banks and conventional banking options. Allowing you to both have your cake and eat it too, Atmos offers online savings accounts with nationally leading rates, cash-back checking including hundreds of sustainable businesses and award-winning customer technologies all while only funding climate-positive infrastructure.

Not only does your personal banking not have to harm the planet by supporting things like fossil fuels and other environmentally harmful industries, it can help regenerate a healthy and balanced earth by reinvesting in things like healthy soils, renewable energy and equitable access to financial services.