Socially Conscious Banking: What Is It and Why Should You Care?
When you deposit your money into a bank, it doesn’t just sit there. Every bank recycles your funds to make money themselves, typically by lending it out.
If you have no idea where your funds are being invested or who they’re being lent to, you’re not alone.
However, if you care about social issues like climate change and environmental responsibility, it’s worth looking into where your bank is putting your money.
Big banks like Chase, Citigroup, and Bank of America, for example, invest large amounts of money in fossil fuels, something that is ultimately helping drive climate change and hurting the environment through projects like coal mining, deep sea oil drilling and natural gas fracking.
So, what can you do if you don’t like where your bank is putting your money? Well, the alternative is to deposit your funds into socially responsible banks.
In this article, we’ll dive further into exactly what socially responsible banking is, why it matters, and how you can make the shift to using a new bank that doesn’t support environmentally harmful initiatives. Changing where you bank and aligning your money with your values is one of the most important and accessible things you can do to create the positive change you want to see in the world.
What Are Socially Responsible Banks?
In broad terms, socially responsible banking, or ethical banking, is a term used to describe banks that seek to achieve positive societal or environmental impact.
Don’t be fooled. Socially responsibly banks are just banks, and they offer similar products, services and features as your local community bank or any of the bigger national banks. What makes socially responsible banks different is that they then go one (or many!) step(s) further to ensure that the deposit products and services they offer, and the loans they make, provide positive societal or environmental impact.
Exactly what this means varies depending on the financial institution.
For example, a socially responsible bank might choose to invest in renewable energy, such as solar energy, to help counteract carbon emissions and climate change.
A financial institution might also choose to support other socially conscious organizations and progressive causes, such as those tackling gun violence or civil rights, or they might try to offer banking services to low- and moderate-income communities.
How do you know which banks engage in socially responsible investing?
It’s easier than ever to find a socially responsible bank, but it’s still important to do your due diligence and conduct your own research about any bank you’re thinking about depositing funds with.
This is because there is a lot of “greenwashing” by big traditional banks and smaller regional banks that claim to support environmental causes and other social issues, but continue to support businesses and activities that might be bad for those very same causes. An example might be a bank that claims to support renewable energy to combat climate change, but then lends money to companies drilling for fossil fuels or performing other environmentally damaging activities.
So, make sure to look further than just the information that’s listed on any bank’s website and read third-party articles about the institution to make sure they really are engaging in ethical banking.
Historically, credit unions have been some of the most socially conscious financial institutions. There are more and more ethical banks popping up these days because the role of capital allocation as a root cause of greater societal issues is becoming more understood. Here are just a few examples of some of the top ethical banks:
● Amalgamated Bank
● Atmos Financial
● Beneficial State Bank
● Spring Bank
● Sunrise Banks
Socially Responsible Banks and Credit Unions: Certifications and Networks
Besides researching the causes and initiatives that a bank supports with its lending activity, you can also look out for certain certifications and memberships that indicate a bank’s commitment to social responsibility.
B Corp Certification
B Corp certification is a private certification for for-profit businesses that demonstrate a high level of social and environmental responsibility.
B Corp certified businesses are committed to reducing inequality and poverty, creating a healthier environment, and building stronger communities, among other things.
For banks and credit unions to become B Corp certified, they must pass a series of assessments and verifications to determine if they meet the minimum requirements for certification and pay an annual certification fee based on their annual sales revenue.
A list of all certified B Corp banks and credit unions can be found online in the B Corp directory.
Community Development Financial Institutions
Though it is not a certification in the strict sense of the word, Community Development Financial Institutions, or CDFIs, are another type of values-aligned banking entity.
CDFIs share the common goal of supporting local communities by providing access to financial products and services to residents and businesses in low-income communities.
For example, banks and credit unions with a CDFI certification may offer a loan fund for small businesses or help low-income families finance the purchase of their first home.
Organizations that are part of the CDFI program strive to revitalize their local community by offering financial services that have been historically hard to access.
The CDFI is run by the US Department of the Treasury and there are CDFI certified institutions in all 50 states, as well as in the District of Columbia, Guam, and Puerto Rico. You can find a list of them all on the CDFI’s website.
The Global Alliance for Banking on Values
The Global Alliance for Banking on Values, or the GABV, is a network of independent banks that are using finance to contribute to sustainable economic, social, and environmental development worldwide.
Being an alliance, banks that belong to this network strive to engage with one another and other financial institutions outside of the network to share best practices in sustainable banking and promote big change in the financial industry.
You can find the membership criteria for The Global Alliance for Banking on Values and an interactive map of all member institutions on the GABV’s website.
Why Should You Care About Socially Responsible Banking Services?
You might consider yourself a conscientious global citizen who cares about the environment and other people.
But…what good are those good vibes if the money you deposit into your 401K, checking and savings account is being invested in fossil fuels and associated projects that are bad for the environment and bad for local, disadvantaged communities.
Sure, it’s pretty hard to know where every penny you spend is going, but changing your bank is something relatively easy to do that can make a big difference in the long run.
If everyone who cared about the environment withdrew their funds and closed their savings accounts with big banks like Chase, Citi, and Bank of America, and instead deposited them with other banks who support socially conscious efforts, imagine how much money would be taken away from big oil companies and put towards improving the environment and local communities. Imagine the power that those banks would lose.
How to improve your social responsibility by changing your personal bank account
1. Pick a new bank
2. Open an account
3. Transfer your funds
4. Close your old account
If you’re ready to take the leap to opening an ethical bank account, the process is really quite simple. The first step to take is to choose which bank you want to open a new account with.
If you don’t know where to start, you can look for local banks in the B Corp directory or search for a local community bank that is part of the CDFI network or The Global Alliance for Banking on Values.
Once you’ve chosen a new institution to bank with, open an account in person or online, then transfer your funds from your old account to the new one. Finally, close your old account to sever ties with your old non-socially-conscious bank for good.
If you have credit cards through your old bank, pay them off and cancel them and look for better options offered by your new banking institution.
Keep in mind that switching credit card providers won’t hurt your credit score in any way, as long as you continue to make regular credit card payments on time.
Consider Atmos If You Want To Make a Positive Environmental Impact
Climate-positive personal finance is at your fingertips
Atmos offers FDIC-insured bank accounts that place an emphasis on decreasing the negative environmental impact in the financial industry. It goes way beyond other socially responsible banking options in that it is the only banking option that uses 100% of every dollar deposited to reverse global warming, Atmos offers high-yielding savings accounts and checking accounts with impressive cashback benefits and then uses all of your money to fund climate-positive infrastructure and the energy transition.
Atmos also partners with a wide range of non-profit organizations that are making positive contributions to the environment and helping fight climate change through some of the following initiatives:
Energy Efficiency Overhauls
Final Thoughts on Socially Conscious Personal Finance
We have more information than ever regarding the environment, climate change, and other social issues. There are all kinds of ways you can take action to support issues you care about and have a positive impact on the world.
Doing nothing is just adding to the big problems of the world out there.
Switching to an ethical bank is something easy to do that can help improve the world for our own and future generations. There’s no reason to leave your money with non-ethical banks who invest it in fossil fuels and projects that harm the environment or at-risk communities.
So, what are you waiting for? Start exploring your options for more socially conscious personal finance today!