For most of us career bankers, it is refreshing to have a discussion on the loan committee whether a snack food company is creditworthy based not only on the balance sheet, but also on its organic food mission and impact on customers.
A call for transformation of the global banking system, put forth by the Global Alliance for Banking on Values (GABV), powerfully reverberated in 2009, when this network of independent banks (mine included) was first launched internationally. As a result, values-based banking – the movement to realign “daily” cash and generate a measurably beneficial impact on society while also making a financial return – has the wind at its back.
Today, GABV has 43 member banks, credit unions and microcredit banks in more than 30 countries, serving 41 million customers and redirecting for good close to $130 billion in assets. All these institutions have a shared belief that transparency of information and placement of assets is one of the most important drivers of change in modern finance.
By applying rigorous screens to the deposits they take, the loans they make, and their own internal operations (i.e., CEO pay, workplace equity, and employee engagement), these banks place impact alongside profit. Some GABV members turn customers down if they do not meet their mission-aligned criteria or engage in environmentally or socially unsound practices, regardless of the business case. Others want to use finance as a tool for gender-equitable social change, all the way from access to capital to products benefiting women. Whatever the case,a “do good/no harm lens” is actively pursued, which is how banking becomes a force for good.
Both impact investing and values-based banking have proved to benefit the economy as they boost long-term financial performance. Just as important, there is also a growing customer demand for it. In a recent survey regarding incorporating Environmental, Social and Governance (ESG) criteria, 85% of money managers cited client demand as a core motivation for working in impact investing (US SIF, 2016). This is most likely why large financial institutions have joined the effort in the last few years and are now doing impact investment at scale through launch of impact investing arms (JP Morgan, BlackRock), or acquisition of impact investing boutiques (Goldman Sachs’ acquiring Imprint Capital).
Given their importance in the financial markets (underwriting the entire financial system), it remains to be seen whether big banks are using impact as just another profit-making tool or some decide to truly adopt the “do good/no harm” policy and cut financing to new and existing dirty-energy projects, including the Keystone and Dakota pipelines, private prisons, adult entertainment, even weapons and wars, among others. Their efforts in impact investing remain overshadowed by their primary activities, leading certain activists to label the big banks’ activity as nothing more than “greenwashing.”
Impact, however, is in the eye of a beholder. It rests on a continuum, and there is something for everyone to choose from based on appetite and stage of adoption. That’s a good thing, because vast amounts of capital still need to be redirected to stop the fossil fuel industry, halt destruction of the last remaining world rainforests, and tackle climate change.
Below are some steps you can take to join the ranks of GABV banks and genuine impact investors, so that, together, and before it’s too late, we can all use finance as a force for good.
Ways to use money as an expression of your values and as an agent of change
- Move your money to a mission aligned bank like New Resource Bank, Sunrise Credit Union, or Amalgamated Bank. Here is a full list of GABV banks. You can also open a traditional checking or savings account at a nearby Community Development Credit Union. These are nonprofit banks that focus on supporting local neighborhoods.
- Talk to your pension fund and mutual fund financial advisers. You might discover you are invested in harmful industries. For example, the top investors in private prisons include Vanguard (by far the largest), Blackrock, BNY Mellon, State Street, and Fidelity. Consider moving your assets to funds that screen for particular causes you care about.
- Think about engaging in Impact investing (you can start with an investment as small as $25 through KIVA or $1,000 through RSF Social Finance).
Impact strategy tips for key players
- For NGOs and foundations: Are you supporting environmental or social benefit programs and at the same time undoing some of your impact through your funds being deposited at a bank financing fossil fuels, DAPL, private prisons, etc.?
- For foundations: Move your operating funds to a mission aligned bank. Consider impact investing, or if already a part of your portfolio, consider increasing it. Impact investing may not be the best way to get great returns, but it can be a great way to take a solution out to a lot of people and make impact. US foundations hold nearly $800 billion in collective assets (Foundation Center 2016), and currently only a small fraction of that money is managed with one or more ESG criteria. Think about how much impact you can make by moving your funds. Join the ranks of groups like the Heron Foundation and Divest Invest movement.
- For people and organizations looking to divest from banks financing DAPL, petition and full list of banks: Tell banks to stop funding the Dakota Access Pipeline!
- For anyone wishing to make an impact: Don’t Boo: Instead Vote, Bank and Invest Responsibly! Mission-align all your finances, investments and cash with your values. To paraphrase Muhammad Ali, do not only believe in taking the right decision, take a decision and make it right. For even more impact, support nonprofit organizations like Rainforest Action Network pushing the banking sector to cut financing to new and existing dirty-energy and doing important work to protect rainforests and the climate, and other similar groups like 350.org, Friends of the Earth, Amazon Watch, Sierra Club, Union of Concerned Scientists, and Greenpeace.