Published on January 18th, 2008 | by Stephanie Evans2
Green Banking Lends Humanity a Sustainable Hand
Some people do their banking online and some buy checks made from recycled paper. For most of us, the idea of “green banking” doesn’t extend much beyond these things.
Many people are looking for ways to paint Wall Street eco-green—instead of dollar green—by investing in eco-friendly businesses. It’s good to keep in mind that the choice of where to establish checking and savings accounts can also impact the environment and affect the sustainability of local communities…
Green banking, socially responsible banking, community investment banking, and eco banking are all terms that mean relatively the same thing: banks or financial institutions that incorporate an ecological outlook into their business model.
The Basics of Green Banking
In its simplest form, your bank uses the money you deposit into checking and savings accounts, or certificates of deposit (CDs) by making loans to businesses and to individuals for personal purchases such as cars and homes. The bank earns revenue from the interest it collects on the loans, investments it makes, and on fees it earns through various other services.
Just as investors on Wall Street have traditionally been concerned only with the profitability and the return—or interest earned—on an investment, traditional banks are concerned primarily with earning the highest interest (or profit) they can get without regard to the kinds of business the investments promote.
There is evidence of a tidal wave of change as more and more banks align their investment decision-making with the triple bottom line: people, planet, profit.
Many banks are envisioning a bright future defined by ecological economics. While the staid old mega-banks are only now beginning to test the waters, some young upstart establishments are plunging in full force with a complete focus on social justice and environmental economics. They are insistent upon a green viewpoint, defining community banking in a whole new way that allows even their smallest depositors the opportunity to put their dollars to work for healthier communities and a healthier planet.
Green Community Banking: A Growing Trend
In 2001, a survey conducted by the Social Investing Forum revealed that “community investing is the fastest-growing category of socially responsible investing in the U.S., increasing from $5.4 billion dollars in 1999 to $7.6 billion [in 2001].”
In 2003, the Community Investing Campaign—a joint effort between the Social Investing Forum Foundation and Co-Op America—recognized 10 pioneering banks and other organizations for their investment strategies. Among the honorees were Vermont’s Chittenden Bank, Santa Fe’s Permaculture Credit Union, and ShoreBank Pacific (located in Washington and Oregon), whose green investments support such programs as:
- forest preservation
- water production
- responsible farming practices
- loans to displaced timber workers to help them start environmentally friendly businesses
- help for low-wage earners to purchase homes
- community education and mentoring programs
One honoree, ShoreBank, is so committed to “advancing the environmental sustainability” of any projects it supports that the bank employs a full time scientist who advises on energy use, water use, pollution, and natural resource conservation.
Visit the Web sites of Co-op America, the Social Investment Forum, and Community Investing for more information about ecological economics and to find other eco-friendly financial institutions.
….there are a number of ways that you can make even the smallest bank account work for you, the planet, and the sustainability of your own community.
Researching Your Options
While slow to enter the world of green banking, the larger banks are making progress—many have started solar lending programs and other loan programs that allow borrowers to purchase products and services for greening their homes and businesses. Recently, Wells Fargo announced that their credit/debit rewards cards will allow cardholders to use their points to buy wind power to offset their personal carbon output. Every 5,000 points buys 6,000 kilowatt hours of wind power.
The best way to find out about the possibilities in your area is to shop around with local banks. Make appointments to talk with loan officers and ask them about the bank’s policies for community investment and customer participation programs. You may be pleasantly surprised to learn that your small savings account has helped build solar-powered affordable housing in your own town or perhaps helped fund a micro-loan to a woman in a war-torn region, allowing her to buy a sewing machine and start a small business.
If you prefer to do business closer to home, one way to green your own banking practices is to look to your local bank and encourage them to incorporate the triple bottom line for local sustainability.
Get to know the people who work at your bank. Write a letter or make an appointment with the head of your bank or the branch where you do your personal banking and ask questions about:
- the bank’s policy about recycling and paper use
- energy saving efforts or environmental improvements the bank has made to its buildings
- investment and loan policies
- what percentage of loans are awarded to environmentally focused companies or emerging technology
- future plans to do more—encourage your bank with your support and continued patronage
Also ask about special programs. In Santa Rosa, California several banks and local agencies developed a GEL—Green Energy Loan—program. Participants formed a consortium that includes the utility company, the water agency, the trash/recycling hauler, the local university and their environmental technology center, the Climate Protection Campaign, along with a locally owned home improvement center and four locally owned banks. Through this program:
- loan applicants first apply for a loan with a GEL lender
- an independent analyst evaluates the home to identify the best options for energy savings and provides a prioritized list of upgrades
- the lender makes the loan to cover upgrade costs
- the local university’s environmental technology center monitors and confirms the post-upgrade savings
On a more personal level, you can ask if your bank offers:
- checks printed on recycled paper
- online banking and account maintenance
- automatic check deposit
- online bill paying services
All of these practices help to reduce paper use, as well as fuel consumption, since records and money are exchanged digitally and are not sent by air and truck transport.
Wetlands Mitigation Banks
Contrary to what the name seems to imply, mitigation banks are not places that you can walk into, open a savings account, and expect that the bank’s loans and investments are put towards wetlands preservation!
It is common knowledge that any time a developer wants to build a commercial or residential project, an Environmental Impact Report is required. This report determines the extent of environmental damage a given project will likely incur. Once the proposal is established, developers are usually given a choice as to how they will mitigate those negative effects on the environment.
Mitigation banks were originally designed to be a third party option through which the developer pays mitigation fees and the “bank” takes on the implementation and ongoing oversight of the mitigation project. It is a huge benefit to the companies charged with the mitigation requirement:
- the companies can turn over the process and the liability to an agency that is vastly more adept at successfully implementing the mitigation project
- wetlands, streams, and other restoration projects benefit because larger pools of money are available in a systematic and coordinated effort, rather than the piecemeal way of funding from past practices
For more information about mitigation banks, visit the EPA’s Mitigation Banking Factsheet.
While you probably won’t be banking at a mitigation bank anytime soon(!), there are a number of ways that you can make even the smallest bank account work for you, the planet, and the sustainability of your own community. As we’ve seen, this can be accomplished whether you choose to work through your local bank in small ways, use a national bank that focuses only on sustainable investments, or do business with banks that invest in the world’s most underfunded individuals and communities.
A wide range of opportunity awaits if you’re interested in using your money to make significant positive impacts in your local community and the greater global community.