I first heard the term ethical/sustainable banking bank in 2018 and was absolutely confused by it. I knew what sustainable meant and I knew I kept my money in a bank but I had no idea how the two words could possibly be related. So now for a very brief background when it comes to banking. If you’re reading this, odds are you keep your money in some sort of bank. If you’re like me your parents may have opened a savings account for you when you were younger and over the years you created a checking account and possibly added a few credit cards to your name. As a child I had the idea that banks were just like really big vaults (think Gringotts from Harry Potter). I put my money in and it just sat there until I wanted to make a withdrawal. But, as you probably know, that is not the case. When you put your money into a bank the bank is able to invest that money, along with everyone else’s funds, in whatever way they please. After all they want to make a profit as a company. (also, I understand that this is a very simplified version of how banking works but just work with me here)
Like I said, banks can invest the money you have with them however they want. And if we know anything about the fossil fuel industry, it’s that it is horrible for the planet and also full of money. According to a fossil fuel finance report, there are 33 global banks that have financed fossil fuels with $1.9 trillion since the Paris Agreement. This is money that humans have in their bank accounts, perhaps humans, who like me, a trying to making the world a better place and divest from fossil fuels. So, who are the biggest investors in fossil fuels when it comes banks in America? Chase Bank, Wells Fargo, CITI, Bank of America, Morgan Stanley, Goldman Sachs…do any of these ring a bell? Of course they do; they are some of the biggest banks in the country. But what can we do as an individual against a major corporation? That’s where ethical banking comes in. When I discovered how much major banks were investing in these harmful industries, I was angry. It felt as if all of the actions I took in my personal life didn’t matter since I was banking with Bank of America. Ethical banking looks to solve this problem.
Ethical banking is rooted in conscious development and practices of how banking affects society and the environment as a whole. Ethical banks still seek profit but they try to generate earnings without sacrificing their core principles. Ethical banks often stick to a few major principles:
Community involvement: Many ethical banks and credit unions are focused on the community they serve. This could look like partnering with local business or helping fund community housing. They understand the impact they are able to have and do their best to help those in need.
Sustainable practices: Nearly every ethical bank is focused on sustainable practices. This usually looks like reducing waste, environmentally friendly initiatives, and choosing to not invest in fossil fuels or other industries that cause harm to the planet and the people who live on it.
Client screening: The client screening process for ethical banks applies to clients, organizations, and corporate entities to ensure they avoid working with a company that has a history of unethical and immoral practices.
Consistency of ethics: As important as ethical investment is, ethical banks strive to integrate these core values into all aspect of their business. This means a strong value of ethics in the workplace and how they treat their customers.
When we choose to use an ethical bank, we are ultimately choosing how our money is invested. Switching banks sends a message to larger corporations that we do not want our money to be used to fuel the climate crisis. After learning all of this, I’ve decided to “break up” with Bank of America. I’ve had a bank account with them for nearly two decades so it does feel a bit odd to be switching it up. However, I am fortunate and privileged in the fact that a local credit union aligns with my personal values and is committed to ethical banking. Ethical banking should become the new standard but sadly the major banks of the world are far from ethical. If you’re looking to switch banks be sure to look more into where you want to put your money. Talk to a financial advisor if you like and don’t be afraid to ask banks questions about the morals and ethics that run their company. Your money deserves to reflect what you stand for. MORE RESOURCES
Ethical Banks and How to Find One That Works for You Socially Responsible Banks: Who You Should (and Shouldn’t) Bank With Banking on Sustainability – What’s Next?