Green Finance: These Banks Make Sustainability Their Mission
Many financial institutions are incorporating sustainability initiatives within their mission statements and marketing materials. A small but growing group is going further. Sustainability is foundational to their purpose and informs all aspects of their operations and marketing.
“It’s baked into their mission, vision and values,” says David Reiling, board chair of the Global Alliance for Banking on Values, a network of banks and banking cooperatives using finance to deliver sustainable economic, social and environmental development.
“It’s not like we do our business over here, and then do these other things over there,” adds Reiling, who is also CEO of the $1.6 billion Sunrise Banks in Minneapolis. Along with avoiding activities they believe are harmful, these banks finance projects, such as solar installations, that can have a positive environmental impact. Member banks also work to reduce their own environmental impact.
A mission of sustainability can pay off on the bottom line. A 2020 GABV report, “Real Economy-Real Returns: The Business Case for Values-based Banking,” found that values-based banks, or those that consider people, planet and prosperity in their missions, enjoyed higher rates of return on assets and return on equity than global systemically important banks over 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 combatting climate change and fostering sustainability. “We believe banks should nourish communities and not extract from them,” says Lynn Marie Auzenne, chief marketing officer with Beneficial State Bank, a bank that describes itself as having a triple bottom line: “people, planet, prosperity.”
Regulations are prompting change, as well. New Zealand requires all banks to report on climate, Auzenne says. In 2020, the European Central Bank published its final guide on climate and related risks for banks.
To be sure, no single bank can solve every environmental or social challenge. Instead, community and regional banks need to come together and educate consumers, Auzenne says, noting that people vote every day with their money. “As banks, if we can collectively motivate people to bank greener, then we can magnify the sustainability of our entire economy,” she adds.
Profit and mission
The mission of Climate First Bank in Florida is to “reimagine finance as a force for good and become the most impactful bank contributing to the drawdown of atmospheric CO2,” according to its website.
Like many banks committed to tackling climate change, Climate First is a legal benefits corporation. That is, it’s structured to pursue two goals: earning a profit and promoting the public good. A de novo that opened in June, Climate First also is working toward B Corporation certification. Certified B Corps are independently assessed and meet high standards of verified social and environmental performance, among other criteria.
“We’re merging for-profit community banking with our nonprofit, mission-driven focus,” says EVP Valerie Nussbaum-Harris. The bank offers personal and commercial banking services with a focus on environmental sustainability, such as loans for solar and other renewable energy projects, building retrofits and purchasing certified carbon offsets. “Solar is one industry we plan to disrupt,” through a solar lending program, she says.
The bank also is purchasing carbon offsets to counter the energy it uses in its current location, a historic home in St. Petersburg, Florida that doesn’t allow for an energy efficient retrofit.
Attracting employees with green
Sustainability is both a journey and a different way to do business, says Samantha Pause, chief marketing officer with Mascoma Bank, a certified B corp with locations in New Hampshire, Maine and Vermont
“Every decision we make, it all comes back to, what is the (environmental) impact of this?” she says. While the bank needs to make a profit, it’s seeking to do so in a way that supports local communities, she adds.
To that end, bank leadership supports businesses, such as solar installers, that support the environment, Pause says. The bank also has partnered with several companies that have installed large solar arrays to offset the energy Mascoma uses to power its 31 locations.
As Mascoma draws up plans to renovate some of its locations, management is considering the type of materials used, as well as how waste will be disposed of. They’re also seeking women- and minority-owned contractors. “All these considerations guide our decisions,” Pause says.
An employee-led, environmental-impact team is researching ways Mascoma can steadily reduce its waste generation to zero. Getting there requires “essentially dumpster diving,” Pause says, to identify the types of waste the bank generates, and how it can be recycled, reused and/or donated. This includes not just paper and soda cans, but also building materials from renovations.
Operating with a triple-bottom-line business model can mean reaching decisions takes more time, and projects can cost more, bankers say. And while it’s not possible to show the return on investment of becoming a B corporation focused on sustainability, it has helped Mascoma recruit and retain talented people, Pause says. “They come in the door and say, ‘We never would have considered working for a bank, but because you’re a B corporation, we will,’” she says.
Climate, racial and social justice
Climate justice is inextricably linked with racial and social justice, says Auzenne of Beneficial State Bank. “We also can’t claim to be pro-racial equity and finance industries that disproportionately impact diverse and lower-income communities, such as pipelines and conventional farming,” she says.
At least 75 percent of Beneficial’s loans, in dollars and numbers, must be mission-aligned and deliver on its triple-bottom-line commitment, Auzenne says. At same time, Beneficial can’t engage “contra-mission” activities that generate near-term profits, but at the long-term expense of people and planet. This includes extractive industries like fossil fuels, fracking, coal, pipelines, and nuclear.
As of December 2020, Beneficial had made $135 million in loans to the environmental sustainability sector and lent $42 million to the renewable energy sector. It’s also measuring and disclosing the carbon footprint of its loans, using methodology from the Partnership for Carbon Accounting Financials. This is one step in moving to a goal of net-zero emissions.
Beneficial also measures its own greenhouse gas emissions, including those directly caused by the bank’s energy use, as well as those indirectly generated by activities like employee commutes and business travel. It then purchases and retires carbon offsets to neutralize these emissions.
Its environmental efforts don’t appear to have slowed Beneficial’s growth. Between its launch in 2007 and 2018, Beneficial grew from $29 million to $1 billion in assets.
The “green bank” umbrella often includes financial firms other than traditional banks. Montgomery County Green Bank is not a bank in the traditional sense, says CEO Tom Deyo. Instead, it’s a nonprofit intermediary that provides credit enhancement to help traditional banks support clean energy investment. “We’re trying to make a larger pot of investment (funding) available in the clean energy and renewable energy markets,” he says.
Among other activities in 2020, the bank launched a $600,000 small business energy savings loan program, as well as a low, fixed-rate, no-fee residential solar program. It also supported $2.5 million in seven clean energy projects.
Atmos Financial isn’t a bank but a “climate fintech company,” says co-founder Peter Hellwig.
The company, which launched in January 2021, will finance climate-positive projects with deposits. “One of the biggest blockers to the massive adoption of emissions-reducing technology is access to low-cost capital,” notes Atmos’ website. Because it’s not a bank, Atmos partners 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 the regulated bank environment.”
Becoming a sustainable bank
Only a handful of banks and other financial institutions have made sustainability a core mission. “To some degree, we’re all figuring this out ourselves,” says Nussbaum-Harris of Climate First.
Still, a few guidelines have become apparent. At least one person and preferably a team need to be dedicated to the environmental initiatives, says Becca Hoeft, chief brand officer with Sunrise Banks, which is also a B corporation. This team needs to monitor progress and be data-savvy. “Data is the foundation of every story we tell,” she adds.
The bank can’t just claim to be doing good—it has to act on it, Hoeft says. “You have to ensure that the brand messages align with your organization’s core values and you have support from your leadership team.”
While focusing on climate requires a commitment of time and resources, it also can help banks gain relevancy, especially with younger customers, and even as financial services become commoditized, Reiling says. To achieve that, authenticity is key. “You have to live the values you profess,” he says.