Ethical banking, value-based banking or sustainable banking is a rapidly growing global movement of banks that are driven not solely by profit but also social and ecological responsibility.
At the heart of value-based banking is the “triple bottom line” approach: simultaneously focusing on people, the planet and prosperity. All three goals are treated equally.
“It’s as simple as that,” explained Alex Higgins at European ethical bank, Triodos.
Formed in 2009, The Global Alliance for Banking on Values (GABV) evaluates and connect ethical banks, rapidly growing to 36 members across the world from El Salvador to Mongolia. Together it serves 24 million customers with as much as $110 billion under management.
GABV may be young, but the idea is not. Canada’s most successful ethical financial institution, Vancouver-based Vancity, started as a local credit union in 1946 and now holds $19.8 billion in assets. GABV member Amalgamated Bank in New York was formed in 1923 and now holds nearly $4 billion in assets.
“They all believe that their purpose is to turn banking into something that really serves people,” said GABV’s Linda Ryan and a recent report from the network explains they “don’t just avoid doing harm, they actively use finance to do good.” Value-based banks screen their business clients and lend to companies that promise positive impact.
New Resource Bank in San Francisco and First Green in Florida highlight their commitment to sustainability while others like Sunrise Banks in Minnesota or Southern Bancorp in Mississippi emphasize social good.
Yet it seems clear that such benign intentions are vulnerable to spin. Are these banks really delivering? If in doubt, there are a few ways to judge. Stephanie Meade, director of marketing at New Resource Bank suggests to first check GABV’s map to find members based in the United States.
GABV has a meticulous application process that includes CEO interviews, site visits and a deep dive into the company’s finances, explained Ryan. Are they really ethical up and down the organization? Do they pay living wages? Is procurement sustainably sourced?
Lacking a nearby GABV member, Meade recommends looking for a B Corp. This certification is offered by a worldwide non-profit that ensures a business meets “rigorous standards of social and environmental performance, accountability, and transparency,” according to their website.
And if that fails, Meade said to look for a local credit union but to scrutinize it to ensure it aligns with your values. Still there’s a real problem of access.
Many value-based banks are state chartered which means that they likely won’t offer accounts to residents who live in other states. Beneficial State Bank, for example, has branches and service only in California, Oregon and Washington.
There is one value-based bank that might buck this limitation however. GABV member Sunrise Banks in Minnesota is nationally chartered which means you can start an account from anywhere.
Small footprints can be frustrating, but it’s also part of the banking model explained William Azaroff at Vancity in British Columbia. They want to stay local and really know their clients. But Azaroff recognizes the need to expand access as well. “It’s definitely a balance,” he said.
Smaller banks can also bring other compromises. Eric Dickmann, a financial services marketing director in Orlando was fed up with Bank of America for services reasons as well as political ones. Wanting to make a change, he stumbled across Florida-based First Green.
At first he thought it was just marketing, but after some digging, he was convinced they were for real. “They had a different approach to banking,” said Dickmann. “They wanted to good things for the environment and they wanted to help people.”
But the computer had to be rebooted twice when he started his account and online banking felt out of date. After an ATM malfunctioned, Dickmann who was looking for a full service bank for everything from his mortgage to investments was disappointed. He now keeps his First Green account as a backup.
Realistically, it’s almost impossible for small banks to keep up with the latest technology which is a huge expense, explained Meade. It comes down to asking how good is good enough.
So for the time being, banking your values may not be as smooth as the major players but if you care enough, it’s probably still worth it and voting with your feet will open access over time, especially as technology advances.
Top photo: Global Alliance for Banking on Values executive director Marcos Eguiguren (center) and Her Majesty Queen Máxima of The Netherlands (left) at the organization’s annual conference in Amsterdam in March 2016. Credit: Global Alliance for Banking on Values.