Switch to an Ethical and Socially Responsible Bank
How and why to switch to an ethical, green, and socially responsible bank.
At the Fiscal Femme, we’re all about aligning our spending and investing with our values. Every time we make a spending decision, we’re voting with our values. In an ideal world, we should be able to look at our recent spending and have a good idea of what’s important to us.
To determine if we’re aligning our spending with our values, we need to look at two aspects of our spending.
Categories of spending we choose to prioritize. Are we spending money on travel to see our family? Are we buying high-quality, more expensive food to prioritize our health?
The companies we support when purchasing those items.
Why? We contribute to a company’s bottom line (or profit) with each purchase we make.
Another way we can align our finances with our values is by banking with a socially responsible bank.
Bank with a socially responsible bank.
Where we invest our money and where we bank are financial decisions that vote for our values over and over again.
One of the ways that banks make money is by investing the money we’ve deposited and taking the “spread.” When you have $2,000 in your checking account the bank can be investing part of that $2,000, pay you a meager 0.01% interest, and keep the difference. Let’s say they invest your $2,000 and earn 3%. They pay you 0.01% interest and earn a spread of 2.99%.
Because banks are using our money to lend and invest, many argue that who we bank with has a longer lasting effect than a single purchase. So, how do our banks stack up and why make the switch to a socially responsible bank?
What is a socially responsible bank?
A socially responsible business is one that focuses on its impact on the world and community in addition to earning profit. It’s a company that prioritizes doing good while doing business.
For banks, this specifically means a commitment to using the money (through lending and investing) we keep with them in an ethical way and often focuses on equity, environmental, societal, and political impact.
There are numerous organizations and certifications that help us find banks that are socially responsible - and we can learn more about their practices.
Not all socially responsible banks have the same practices and focus on the same causes. By learning more, we can choose a bank that aligns with our own values.
Certified B Corp
Companies that have the B Corp certification are for-profit businesses that have met a rigorous set of guidelines to ensure that they balance purpose and profit. These companies are “legally required to consider the impact of their decisions on their workers, customers, suppliers, community, and the environment.”
These ethical requirements range from equal pay to sustainability. You can search the B Corp directory for financial institutions that meet these requirements.
You can also look at the full list of B Corp Certified businesses to inform other choices as a consumer.
GABV (Global Alliance for Banking on Values)
The Global Alliance for Banking on Values (GABV) is a network of banks “committed to advancing positive change in the banking sector…” with the goal of changing the banking system to be more transparent and supporting economic, social and environmental sustainability.
You can find local institutions that meet these requirements using their interactive map, which also dives into each bank’s values and practices.
CDFI (Community Development Financial Institutions)
Banks that are part of the Community Development Financial Institutions Fund (CDFI Fund) provide financial products to underserved economic communities. It’s a project through the Department of US Treasury. The requirements to join do not currently include any environmental factors and instead focus on revitalization and development, providing services to people in economically challenged areas.
There are four sectors of the CDFI industry - banks, credit unions, loan funds, and venture capital funds.
Minority-owned banks
Minority-owned banks often do a great job of supporting specific communities. These banks may also be a part of the CDF or have other socially responsible credentials. Here’s a list of Black-owned banks.
The Paris Climate Agreement
Some banks who prioritize environmental sustainability have agreed to abide by the 2015 Paris Climate Agreement. The Paris Climate Agreement is an initiative through the United Nations to limit global temperature rise by reducing greenhouse gas emissions and prioritizing green energy.
Can it be a win-win for my finances?
The best news is, we can choose a bank that aligns with our values and improves our financial well-being. Because these banks have a focus outside of profit, they offer low-fee (or no-fee banking) as well as higher interest rates on your checking and savings accounts.
Once you find a few that align with your banking needs and values, you can look into their specific offerings and see if they provide better benefits to you as the consumer. There’s nothing better than a values-based win-win!
Any bank you choose should be FDIC or NCUA insured.
Here’s a list of our favorite socially responsible banks and why.
Anything else I should consider?
Not only is it important to consider your own values as the consumer, it’s also important to take your own banking needs into account. Do you like to bank in person or do you prefer to do it online? If online, do you bank from your computer or prefer to do it from a phone? If you bank from your phone, it will be important that the bank has a user-friendly app.
What types of accounts are you looking for and how many do you need? These are things you’ll want to consider when choosing a bank.
What’s wrong with my current bank?
Deciding to make the switch to a socially responsible bank can feel like a daunting task. Not only do we have to do the research, but we also have to go through the process of breaking up with our current bank and setting up our accounts with our new bank.
You might be thinking, is it worth it? I know I did! You might also be wondering, what’s so bad about my current bank.
Many banks invest or lend a lot of money to industries that probably don’t support your values. Many support the gun industry (more specifically, the assault weapons industry), the fossil fuel industry (like oil, gas and mining which contribute to climate change), large food companies using GMOs and unsustainable farming practices, and big pharma using animal testing, just to name a few.
Not to mention, they aren’t sharing those profits back with you. The interest rates are usually a measly 0.01% and when they lend you money via a credit card they are raking in upwards of 20% interest.
Make the switch to a socially responsible bank.
If you’re ready to break up with your bank and make the switch to a socially responsible bank, woohoo! Once you choose your new socially-responsible bank, you’ll want to open up your account(s). Then you’ll want to go through statements from your previous bank to make sure you transition over any recurring expenses and bills.
This is a really great opportunity to “clean house.” Take the opportunity to cancel any subscriptions you aren’t using. You can also use it as an opportunity to simplify your banking if over time your systems have gotten more complicated than necessary.
Once this is all set up, go ahead and close your previous bank accounts. And do a happy dance for the positive impact your new socially responsible bank (and therefore you) are now making on a daily basis.