Your bank is more than a place to put your money. Banks can use the funds you deposit to create loans or make investments. And in some cases, that may mean using your money to invest in fossil fuels that can harm the environment. Sustainable banks are working to change this model, giving consumers the ability to deposit their money with a company that doesn’t engage in unsustainable practices.
[Read: Best Online Banks.]
What Is Sustainable Banking?
The term “sustainable banking” can mean a lot of things, but it typically refers to a financial institution that has made a commitment to be more environmentally friendly. Instead of focusing purely on profit, sustainable banks act as businesses with a mission to engage in practices that are helpful for the environment and the overall good of the community.
Often, this means not investing in fossil fuels and directing money to projects that can help combat climate change.
You might also see the terms “ethical banking,” “socially responsible banks” and “green banks.” While these terms have some overlap, there are some nuances. For example, according to the Environmental Protection Agency, green banks typically have the following features:
— Mission-driven
— A commitment to clean energy
— Funds to stimulate private capital
— Products across sectors with a focus on bridging market gaps
Socially responsible banks or ethical banks tend to have a broader focus that emphasizes doing no harm to people or the planet. On the other hand, sustainable banking is more concentrated in its focus on the environment and its support of climate-friendly practices.
Though every bank has different commitments and focuses, most sustainable banks focus on environmental, social and economic impacts.
Environmental
One of the main themes of sustainable banking is a focus on the environment. Many sustainable banks don’t invest in fossil fuels. But that’s just the beginning. Sustainable banks tend to favor projects that can support the environment and help the fight against climate change.
For example, Forbright Bank is Fossil Free certified and finances green building upgrades and solar energy. And fintech Aspiration promotes a Planet Protection program that helps you offset your gas purchases with carbon credits, as well its Plant Your Change program that rounds your purchases to the nearest dollar to fund the cost of planting a tree.
“I think there is a push for people to say can we disconnect from that system? … And that’s really where sustainable banking comes into play, which is a banking model that doesn’t engage in financing the acceleration of climate change, that finds ways to finance products and services and ways of working that are good stewards of the environment, that regenerate the environment and tries to divest from fossil fuels and other industries,” says Terra Neilson, chief impact officer at Beneficial State Bank.
Social
Sustainable banking extends beyond the environment, focusing on community and social matters. These institutions financially support good causes they believe in. Amalgamated Bank makes it clear on its website under “Issues We Care About.” These concerns range from criminal justice to immigrant rights. Based on their values, Amalgamated Bank doesn’t lend to private prisons or detention centers.
In the same vein, Beneficial State Bank provides banking and lending services to various community-minded nonprofits.
Economic
Socially responsible banks also focus on economic justice by investing in underserved communities, contributing funds to nonprofits, and lending money for affordable healthcare and housing solutions.
[Read: Best Checking Accounts.]
Why Do People Care About Sustainable Banking?
The effects of climate change impact everyone. It can be easy to feel like you’re not sure what to do and how to do your part, but storing your money in a sustainable bank is one way to put your hard-earned dollars to work in a way that aligns with your values.
“This is a way that consumers and customers can really vote with their dollar in a meaningful way,” says Neilson.
When you put your money in a sustainable bank, you’re supporting an organization that’s committed to combating climate change and moving away from investing in fossil fuels that can harm the planet.
The benefits of sustainable banking include:
— Supporting a mission-driven financial institution
— Creating a positive impact with your money
— Being a part of an aligned community
— Providing transparency about how your funds are used
— Accessing a range of financial products, such as environmental, social and governance, or ESG, investments
If you make the switch from a big bank to a sustainable bank, you’ll have access to many of the same products and services. Neilson says that with the rise of digital banking, many sustainable banks are on par with major banks in terms of user experience.
Additionally, you may be able to get competitive rates on savings products. Forbright Bank currently has an online Growth Savings account with a 5.30% APY, a rate that surpasses many other options.
Top Sustainable Banks
Sustainable banking options can vary based on location, but here are six options to consider:
1. Forbright Bank. Fossil Free and Green Business certified, Forbright Bank offers an online high-yield savings account and certificates of deposit, or CDs. Other banking products are available to residents in Maryland and Virginia.
2. Beneficial State Bank. Certified as a Community Development Financial Institution, or CDFI, as well as B Corp and Fossil Free certified, Beneficial State Bank has branches in California, Oregon and Washington. The bank has checking and savings accounts and a climate credit card that earns rewards supporting climate-related nonprofits.
3. Amalgamated Bank. If you’re looking for socially responsible banks, Amalgamated Bank’s tagline is “America’s Socially Responsible Bank” and offers checking, savings, CDs and credit cards. According to its website, Amalgamated Bank “supports sustainable organizations, progressive causes, and social justice.”
4. Aspiration. You can open a Spend & Save or investment account with Aspiration, where your money isn’t invested in fossil fuels and you can help plant trees.
5. Future.Green. With this company, you get a FutureCard Visa® Debit Card that offers rewards and cash back on climate-friendly purchases. Note that Future itself isn’t a bank. The card and banking services are offered by Piermont Bank.
6. Climate First Bank. You can access personal or business banking options with Climate First Bank. It’s B Corp certified and part of 1% for the Planet.
Consider credit unions. Some credit unions can also have a sustainability focus, but you must be a member. Additionally, there may be eligibility requirements you must meet first. Examples include Clean Energy Credit Union and Verity Credit Union.
How to Find Sustainable Banks
Socially responsible banks may not be as well-known as the major banks. But you have a few options to help you find sustainable banks.
— Bank.Green. Using the search tool on Bank.Green, you can find the best green banks in your area and use filters to see which options have the features you’re looking for.
— GreenAmerica.org. Green America lists sustainable banks and credit unions in its “Get A Better Bank Map.” As part of the criteria, these institutions must meet one of the following:
— Certification from Green America’s Green Business Network
— Classified as a CDFI
— A member of Inclusiv
— A member of the Global Alliance for Banking on Values
— Listed as one of the Minority Depository Institutions by the Federal Deposit Insurance Corporation
— Bank for Good. You can search for banks and credit unions on Bank for Good, which shows fossil-free institutions with an ESG focus. To find what you’re looking for, you can filter by features and designations.
You can also do independent research to find sustainable banks or credit unions serving your community.
“So you start local and you look at things that you’re passionate about and try to find banks and credit unions that align with your particular personal values,” says David Tuyo, CEO and president of University Credit Union, or UCU.
UCU operates with an ESG framework and does not lend money to or invest in fracking, arctic drilling, coal power energy or rainforest deforestation.
Tuyo recommends doing your research and states that the definition of sustainable banking “is wide and variable.” For example, institutions may claim to be a sustainable bank or work with a specific mission or purpose, “but it may not be necessarily the same as another that makes that same claim.”
Many sustainable banking institutions have specific certifications, like B Corp, which measures a company’s social and environmental impact. Others to look out for include:
— 1% for the Planet
— Green America Certified Business
— Fossil Free Certified
— The Global Alliance for Bank Values
If you want to check if your current or prospective bank invests in fossil fuels or other things not aligned with sustainable banking, review the 2024 fossil fuel finance report, “Banking on Climate Chaos.”
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6 Sustainable Banking Options originally appeared on usnews.com
