What Are Socially Responsible Banks and How Do They Work?

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Updated on Tuesday, October 22, 2019

Socially responsible banks are financial institutions that allow their customers to manage their money while supporting a cause that matters to them. If you’d like to make a difference in the world, one way to start is with your bank account.

Working to fight climate change? A 2019 study found that banks worldwide had poured $1.9 trillion into financing fossil fuels since the Paris Climate Accord was adopted in 2015. Looking to support local businesses? A 2017 analysis found that most major banks grant less than one small business loan per branch each year. If fighting climate change and supporting local businesses are values that are important to you, you might want to understand what your bank is doing to help on either front.

Before you consider changing to a socially responsible bank, it’s worth understanding exactly how these institutions work, how to find them and how they can help your wallet. Here’s everything you need to know about socially responsible banks.

What are socially responsible banks?

Traditional banks aim to maximize profits for their shareholders. Socially responsible banks are values-based institutions that are focused on lending to ethically minded businesses and individuals — in addition to turning a profit.

Here’s what that looks like in practice. Nearly all banks use the money in their customers’ checking and savings accounts to grant loans and make investments. Usually, consumers have zero control over who receives that money.

Socially responsible banks ensure that the money in your accounts is lent to specific ethical, environmental or politically minded groups.

There are countless ways to make your money count. There are banks focused on funding clean energy, combating poverty, funding minority-owned businesses, donating to political parties, supporting religious groups and more.

If there’s a cause you care about, there’s probably a financial institution that can help you support it.

“It’s really about figuring out what’s important to you as a consumer, and then finding a bank that matches your values,” Becca Hoeft, the chief brand officer for the Sunrise Banks, a socially responsible financial group based in Minnesota, said.

The benefits of choosing a socially responsible bank

Every bank has its pros and cons, but switching to a socially responsible institution could have a major impact on your daily life and your wallet. Here are a few of the biggest advantages.

Your money will support the causes you believe in

This is the most obvious advantage, as you can pick a bank that will invest your dollars into something you truly care about. It’s an experience that allows everyday people to enact major changes, according to Morgan Simon, a financial expert and author of Real Impact: The New Economics of Social Change.

“Even if we are not particularly wealthy, we’re all connected to these webs of wealth, and we’re able to influence it,” Simon said. “We may only get to vote every four years, but you can vote every day with your dollar.”

You may get higher rates and lower fees

Socially responsible banking isn’t just about values, though. Many institutions also offer ways to save money, including lower fees and higher interest rates than some of the big banks.

For example, Wells Fargo, and Citi offer less than 0.05% annual percentage yield on standard checking accounts, and all three charge between a $10 to $15 monthly fee. Meanwhile, many of the major socially responsible banks offer free checking accounts, and some provide up to 1% APY.

Still, that’s not true for every single bank, and it’s worth comparing rates and fees for both checking and savings accounts before making a decision.

It may help you spend more responsibly

Socially responsible banks will also help you spend money more wisely — and, if you want, more ethically. Offers differ between banks, but here are a few examples:

  • New York-based Amalgamated Bank will match half of the interest you earn from deposits, then donate it to the charity of your choosing.
  • Aspiration, based in California, will track all of your spending with an “impact measurement” that tells you how much your purchases affect the environment and other factors.
  • Sunrise Banks allows you to dedicate your account funds specifically toward developments in your local community.

You’ll connect with people who share your values

Because socially responsible banks are based on interests and beliefs, they’re also a chance to connect with people who share your values. Hoeft noted that this can be one of the biggest benefits of working with an ethically focused institution.

“Banking is pretty boring,” Hoeft said. “It’s not a sexy business. But when you look at these banks who are trying to make a difference because they see a problem — there’s a sense of community that occurs.”

How to find a socially responsible bank

So how do you know which banks are for real? There are a number of affiliations that tell you whether a financial institution is worth considering — and help you understand their principles.

  • Community Development Financial Institutions (CDFI): For Simon, this is where anyone looking for a socially responsible bank should start their search. CDFIs are institutions that focus specifically on revitalizing low-income communities around the United States. Each bank must meet a set of standards to become eligible, including maintaining corporate accountability and commitment to financial development in its community.
  • B Corporations: These are businesses around the world that meet a specific set of values laid out by the “B Corp Declaration of Independence.” Companies that receive this certification must value social and environmental advocacy, as well as public transparency. The group’s website even has a directory where you can search for B Corps that match your interests.
  • The Global Alliance for Banking on Values (GABV): There are only 55 GABV members worldwide, and just eight in the U.S. That’s because in order to join, a bank’s values must meet the alliance’s set of key principles — including its “triple bottom line” approach, which emphasizes human welfare and the environment in addition to profit.
  • The Paris Climate Agreement: Some environmentally focused banks, including Sunrise and Amalgamated, have also committed to abide by the 2015 Paris Agreement. The central goal of the agreement aims to limit the rise in global temperatures by promoting green energy and reducing the use of fossil fuels.

What are some popular socially responsible banks?

  • Amalgamated Bank: One of the largest and best-known socially responsible banks, Amalgamated has more than $4.5 billion in total assets. The New York-based financial group is majority-owned by a workers union but also prioritizes a range of other issues such as women’s rights, immigrants’ rights and the environment.
  • Aspiration Bank: Based in California but focused specifically on online banking, Aspiration describes its mission as helping customers “make money while making the world a better place.” In practice, that means fossil fuel-free bank accounts, donating 10% of its invested money to charity and offering bonus rewards for customers who shop at socially conscious companies.
  • Southern Bancorp: With more than 80,000 customers, Southern Bancorp is one of the South’s largest socially responsible banks. The company is both a GABV member and an CDFI-certified institution, and its contributions are focused mainly on rural community development.
  • Thrivent: A not-for-profit financial service provider with a Christian focus, Thrivent is an option for those looking to bank ethically while also supporting their religious values. It’s also a massive organization: Thrivent has more than 2 million members and in 2018, the group made the Fortune 500 list.
  • Sunrise Banks: Hoeft described Sunrise’s mission as “empowering financial wellness for everyone,” and the bank works toward that in a number of ways. The company is a certified B Corporation and part of the GABV, in addition to aligning its investments with the Paris Climate Agreement.

The bottom line: Should I use a socially responsible bank?

There are plenty of ways to make an impact with your money, but socially responsible banks can be an easy and empowering option to express your values. Still, it’s worth exploring all of your options — both ethical and financial — before committing to a new bank.