The signing of the Paris Agreement was a revolutionary step towards addressing climate change. However, what you may not have realized is that the six largest banks in the United States have pumped more than $1.1 trillion into oil, gas, and coal companies since the agreement was signed in 2016.
So if you’re serious about solving climate change, you probably don’t want to use one of these companies. But you haven’t had many alternative options to choose from until now.
That’s why we’ve put together the following guide. It covers everything that you need to know about how green banks work and what they’ll do for both your finances and the planet. Keep reading to learn more.
The intersection between banking and ethics
The banking industry is essential. It plays a huge role in the modern financial system by helping to make the transfer of funds more efficient. Banking is such an important service that we’ve largely ignored some really big problems with it until recent years.
Keep in mind, when you give a bank your money, it doesn’t just sit in your account. Instead, the bank invests that money to earn interest on it. They have full control over where it goes with only limited oversight from the government.
More often than you might think, this leads to your money being spent on enriching companies that are actively harming the environment.
This presents an ethical question that all of us have to answer for ourselves. How comfortable are we with our money being spent in this way? And if we’re not comfortable with it, what action are we going to take?
What most banks do that they don’t want you to know about
There are lots of ethical landmines that the banking industry would prefer for you not to know about. These include:
- Market manipulations
- Credit score manipulations
- Improper selling of securities
- Short-selling of bank shares
- And more
But if you’re passionate about the environment, then what should grind yrs is the traditional banking industry’s continued investment in fossil fuels. Some of the largest financial institutions in the United States (Wells Fargo, J.P. Morgan, and others) are leading the charge here.
Banks would prefer that you don’t know about that because they don’t want you to realize exactly what your money is contributing to. Thankfully, it’s very easy to find all of this information nowadays. If you want to use your wealth ethically, it’s easier now than ever to do that.
Enter green banking
Green banking is the answer to the problems presented by the traditional banking system. It’s a relatively new idea but a very straightforward one. Green banks use your money to help the planet instead of hurting it. That’s because they’re mission-focused whereas traditional financial institutions are always profit-driven.
This has important implications for what green banks do with the money they hold. Most of it gets invested into clean energy projects, charitable organizations that fight climate change, and other worthy causes.
If you asked most people, they would rather have their money going towards these efforts instead of lining the pockets of fossil fuel executives.
There are a few different ways that green banks help the environment. One is through the fees that they collect. Companies like Aspiration even let you pay them what you think they deserve. This money is then pooled together and used to plant trees and invest in innovative clean energy companies.
Many green banks also offer loans. The interest that they collect from these is also invested in green projects that push our planet towards net-zero emissions instead of away from that milestone.
Two types of ethical, green banks
Now that you know what green banks are, let’s look a little closer at them. Several types of these banks are worth your consideration.
But first, it’s important to take a moment to consider exactly what makes a bank ethical. Understanding this can give you a better sense of which green banks are for real and which are just trying to appeal to the climate change movement.
Most importantly, before choosing a green bank, you need to make sure that they’re transparent with their investments. Otherwise, you have no real way of confirming that your money is not on causes that you care about.
The very best green banks are certified in such a way as to ensure that they have to act ethically at all times. More information on that process is included under the next heading.
Many green banks have also made their commits to protecting the planet. For example, Aspiration has an explicit policy that states we’ll never invest in anything that contributes to fossil fuels. As you look for an ethical bank, institutional pledges like these are another factor that you’ll want to consider.
B-Corps, GABC, and CDFI certified banks
Many green banks have one or more of these certifications. These are credentials that you want to see if you’re a consumer because they indicate that the bank has committed itself to an ethical set of principles. Here’s a quick look at each of the certifications to show you why they matter.
B Corp certifications are legally required to consider how their actions impact the environment. More than that, they also have to think about how what they do can impact workers, customers, suppliers, and even the community.
Many banks will tell you that they think deeply about these issues. And maybe most of them do that. But you have no way of knowing for sure unless the bank has a B-Corp certification.
For example, Aspiration is a certified B-Corp. That means you can be confident in the fact that we carefully consider each action that we take before making it. This is a certification that’s worth looking for if you care deeply about the environment.
GABV (Global Alliance for Banking on Values)
GABV is another qualification that’s worth looking for when choosing a new bank. This is an independent network of banks around the world. It was formed to promote a more transparent and supportive financial system.
If a bank belongs to GABV, then that’s usually quite a good sign that they’re committed to environmental issues. You can check out this map to locate GABV institutions in your area and to see what they’re doing to support the causes that you care about.
CDFI (Community Development Financial Institutions)
CDFIs are also worth mentioning because of the support that they provide to underserved economic communities. These banks have committed themselves to expand access to these communities and the people in them have to financial services.
If a bank is a CDFI, then you know that they’re committed to helping people, towns, and communities that are down of their luck. That’s a stark contrast to many traditional financial institutions, which often ignore the economically underserved for the benefit of the already wealthy.
Credit unions, community-minded local banks
You don’t necessarily have to look on a national scale if you want to find an ethical bank to do business with. Instead, you may want to look locally. Credit unions and other community-minded local banks are often very ethical in their practices.
These banks are also always committed to their communities. That’s because if a bank only operates within a community, then the more that the community thrives, the better the bank does. That means these banks often have more of an incentive to support growth and development in their communities.
The impact green banking can have on the planet
Green banks are a new type of eco-business that will have a lasting impact on the planet. In they’re ready leaving their mark. Green banks have helped establish climate-resilient infrastructure and more efficient water and waste management systems. They’ve played a key role in pushing the global economy towards net-zero emissions.
But green banking should have an even bigger impact in the future. Before green banks, it was quite difficult to be both fiscally responsible and environmentally conscious. You usually had to favor one over the other and that can be a tough decision to make.
Green banks are showing us that this isn’t a dilemma. People of all income levels and financial backgrounds can help the environment without having to sacrifice their finances to do so.
This is because green banks offer all of the services that you would expect from a traditional bank with none of the damage to the environment. When you choose a green bank, hardly any aspect of your finances will have to change. You’ll just get the peace of mind that your money is making a positive impact on the planet.
Will green banking be the future of finance?
It’s difficult to make an accurate prediction of what the future will look like in these turbulent times. But here’s what we do know.
At the same time, we’re living through a period of impressive consumer freedom. Thanks to the advent of new technologies like the smartphone, it’s easier than ever for people to choose which companies they want to support.
We look at facts like these and can’t help but to conclude that green banking will be a huge part of the financial industry moving forward. Green banks support sustainability in ways that traditional institutions will never be able to match due to their exclusive focus on profits.
Over the coming years, green banking will become easier and easier for people across the globe to participate in. Green banks should also continue to expand their services as they become more popular. As this process plays out, green banks will begin to play an increasingly important role in the modern financial system.
What Aspiration does
Green banks are absolutely the future. But you don’t have to wait to start using one. Aspiration is already here and ready to help you invest, save, and spend your money in environmentally conscious ways. Keep reading to learn more about what we can offer you.
Donate 10% of every dollar to charity
When you use Aspiration, 10% of every dollar that you spend will get sent to charity. Our company was built from the ground upon a foundation of ethical principles. We’re focused on providing banking services that serve the needs of many, not the needs of a few wealthy individuals. That’s why we’ve made this commitment.
Reforest while you shop
Deforestation has had a devastating impact on the planet. We make it easy to do something about it. When you use our cards, you have the option of rounding up every purchase that you make to the nearest dollar.
That money gets pooled together is spent on reforesting the areas that have been most impacted by excessive deforestation. This makes it super easy to support the planet by just shopping for what you normally buy.
5% cashback on socially conscious spending
At Aspiration, our goal is to make the financial system more ethical and environmentally friendly. That’s why we provide this incentive to all of our customers. When you spend your money at an eco-friendly store, you get rewarded for it in the form of an additional 5% cashback.
Keep track of your environmental impact score
Even if you intend to support the planet with your spending habits, it can sometimes be difficult to do so in practice. That’s why we created the Aspiration Impact Measurement (AIM).
It’s a helpful reporting feature that will show you exactly how your spending habits are impacting the planet. You can use it to fine-tune your shopping patterns to maximize your eco-conscious spending.