Green finance: these banks make sustainable development their mission
By Karen Kroll
Mall financial institutions include sustainable development initiatives in their mission statements and marketing materials. A small growing group goes further. Sustainability is the basis of their goal and informs all aspects of their operations and marketing. âIt’s an integral part of their mission, vision and values,â says David Reiling, chairman of the board of the Global Alliance for Banking on Values, a network of banks and banking cooperatives using finance to ensure sustainable economic, social and environmental development.
âIt’s not like we do our business here and then do these other things there,â adds Reiling, who is also CEO of the $ 1.6 billion Sunrise Banks in Minneapolis. In addition to avoiding activities they deem harmful, these banks finance projects, such as solar installations, which can have a positive impact on the environment. Member banks are also working to reduce their own environmental impact.
A sustainability mission can pay off. A GABV 2020 report, “Real Economy-Real Returns: The Business Case for Values-based Banking”, found that value-based banks, or those that consider people, planet and prosperity in their missions, have enjoyed higher rates of return on assets and equity than systemically important banks global during the five-year period ending in 2018.
The leaders of these financial institutions also say their organizations have a responsibility to play an active role in tackling climate change and promoting sustainability. “We believe that banks should feed communities, not extract from them,” said Lynn Marie Auzenne, director of marketing at Beneficial State Bank, a bank that describes itself as having a threefold purpose: “people, planet, prosperity” .
Regulations also bring about changes. New Zealand requires all banks to report on the climate, says Auzenne. In 2020, the European Central Bank published its final guide to the climate and associated risks for banks.
Of course, no single bank can solve all environmental or social challenges on its own. Instead, community and regional banks need to come together and educate consumers, says Auzenne, noting that people vote every day with their money. âAs banks, if we can collectively motivate people to adopt greener banking practices, then we can amplify the sustainability of our entire economy,â she adds.
Benefit and mission
The mission of Climate First Bank in Florida is to “reimagine finance as a force for good and become the most influential bank contributing to the reduction of atmospheric CO2,” according to its website.
Like many banks engaged in the fight against climate change, Climate First is a legal benefits company. That is, it is structured to pursue two objectives: to make a profit and to promote the public good. A de novo that opened in July, Climate First is also working towards the B Corporation certification. B Corps certified are independently assessed and meet high standards of verified social and environmental performance, among other criteria.
âWe are merging for-profit community banking with our mission-driven nonprofit goal,â said Executive Vice President Valerie Nussbaum-Harris. The bank offers personal and business banking services focused on environmental sustainability, such as loans for solar and other renewable energy projects, building renovations and purchasing certified carbon offsets. âSolar energy is an industry that we plan to disrupt,â through a solar loan program, she said.
The bank is also buying carbon offsets to counter the energy it uses at its current location, a historic home in St. Petersburg, Fla., Which does not allow for an energy efficient retrofit.
Attract employees with green
Sustainability is both a journey and a different way of doing business, says Samantha Pause, director of marketing at Mascoma Bank, a Certified B company with offices in New Hampshire, Maine and Vermont.
“Every decision we make, it all comes down to, what’s the (environmental) impact of that?” she says. While the bank needs to make a profit, it seeks to do so in a way that supports local communities, she adds.
To this end, the bank’s management supports companies, such as solar installers, that support the environment, Pause says. The bank has also partnered with several companies that have installed large solar panels to offset the energy Mascoma uses to power its 31 sites.
As Mascoma makes plans to renovate some of its sites, management is thinking about the type of materials used, as well as how the waste will be disposed of. They are also looking for women-owned and minority-owned entrepreneurs. âAll of these considerations guide our decisions,â says Pause.
An employee-led environmental impact team is looking for ways for Mascoma to gradually reduce its waste production to zero. Getting there requires âessentially diving into dumpsters,â Pause explains, to identify the types of waste generated by the bank and how it can be recycled, reused and / or donated. This includes not only paper and soda cans, but also building materials from the renovations.
Operating with a triple bottom line business model can mean decision making takes longer and projects can cost more, bankers say. And while it may not be possible to show the ROI of becoming a sustainability-focused B Company, it has helped Mascoma recruit and retain talented people, Pause said. âThey come to the door and say, ‘We would never have considered working for a bank, but because you’re a B corporation, we will,’â she says.
Climate, racial and social justice
Climate justice is inextricably linked with racial and social justice, says Auzenne of Beneficial State Bank. âWe also cannot claim to be pro-racial equity and finance industries that disproportionately impact diverse, low-income communities, such as pipelines and conventional agriculture,â she says.
At least 75 percent of Beneficial’s loans, in dollars and numbers, must be aligned with the mission and meet its triple bottom line commitment, Auzenne says. At the same time, Beneficial cannot engage in “counter-mission” activities that generate short-term profits, but to the long-term detriment of people and the planet. This includes extractive industries like fossil fuels, hydraulic fracturing, coal, pipelines, and nuclear.
As of December 2020, Beneficial had granted $ 135 million in loans to the environmental sustainability sector and $ 42 million to the renewable energy sector. It also measures and discloses the carbon footprint of its loans, using the methodology of the Partnership for Carbon Accounting Financials. This is a step towards a goal of net zero emissions.
Beneficial also measures its own greenhouse gas emissions, including those directly caused by the bank’s energy consumption, as well as those generated indirectly by activities such as employee commuting and business travel. It then buys and withdraws carbon offsets to neutralize these emissions.
Its environmental efforts do not appear to have slowed the growth of Beneficial. Between its launch in 2007 and 2018, Beneficial grew from $ 29 million to $ 1 billion in assets.
The âgreen bankâ umbrella often includes financial companies other than traditional banks. Montgomery County Green Bank is not a bank in the traditional sense, says CEO Tom Deyo. Instead, it is a nonprofit middleman that provides credit enhancement to help traditional banks support clean energy investments. âWe’re trying to make a bigger pot of investment (funding) available in the clean energy and renewable energy markets,â he says.
Among other activities in 2020, the bank launched a $ 600,000 small business energy saving loan program, as well as a low-rate, fixed-rate, no-fee residential solar program. It also supported $ 2.5 million in seven clean energy projects.
Atmos Financial is not a bank but a âclimate finance technology company,â says co-founder Peter Hellwig.
The company, launched in January 2021, will fund climate-positive projects with deposits. âOne of the main obstacles to the massive adoption of emission reduction technologies is access to low-cost capital,â notes the Atmos website. Because it is not a bank, Atmos is partnering with other banks to offer FDIC insurance on its accounts.
Why not become a bank? “Our ability to maximize our impact to solve problems,” Hellwig says, “is faster outside of the regulated banking environment.”
Become a sustainable bank
Only a handful of banks and other financial institutions have made sustainability a core mission. âTo some extent, we all do this on our own,â says Nussbaum-Harris of Climate First.
Still, a few guidelines have become evident. At least one person and preferably one team should be dedicated to environmental initiatives, says Becca Hoeft, brand director at Sunrise Banks, which is also a B company. This team should monitor progress and be in control of the data. âData is the foundation of every story we tell,â she adds.
The bank cannot just pretend to do good, it must act on it, says Hoeft. âYou need to make sure the brand messages align with your organization’s core values ââand you have the support of your leadership team. “
While focusing on the climate requires a commitment of time and resources, it can also help banks gain relevance, especially with younger customers, and even when financial services become mainstream, Reiling explains. To achieve this, authenticity is key. âYou have to live the values ââyou profess,â he says.
Karen M. Kroll is a business and financial services writer and content marketer based in Minnesota.