What is an eco-friendly bank
When you deposit money in a bank, it doesn’t just sit there. Banks use your deposits to make loans and investments for all kinds of projects, and depending on the bank, your money could be funding anything from solar farms to small business loans to coal mining. Broadly speaking, eco-friendly banks are those that acknowledge that their lending and investment choices have an impact on the health of the planet, and take action to decrease funding projects that harm the environment. Some environmentally friendly banks not only refuse to finance projects that contribute to environmental degradation, but also proactively finance renewable energy or climate positive projects. There’s no single gold standard or metric when it comes to eco-friendly banking. Banks aren’t required to publicly report the environmental impacts of all their loans, nor are they required to uniformly disclose fossil fuel financing. However, there are many initiatives and organizations working to highlight sustainable banking options. Below are a few things to watch out for, along with several approaches you can take to go green with your banking.
What to watch out for: greenwashing in banking
Before looking at specific recommendations for green banks, it’s worth a reminder that anyone interested in sustainability and banking must be particularly wary of greenwashing. If you search on bank websites for sustainability commitments, there’s often a list of eco-friendly efforts that are not directly tied to the bank’s financing decisions. If a bank’s commitment to going green stops with their LEED-certified office buildings or paperless statements, proceed with caution. These efforts on their own can be climate-friendly but are ultimately harmful if used as a strategy to detract attention from larger issues, like the bank’s role in financing deforestation or Arctic drilling, for example. A bank’s biggest impact on the environment doesn’t come from how they run their branches. The number one way a bank impacts the environment is through how it invests its money.
Which banks invest in fossil fuels
If you’re like most people in the US with a bank account, your money is likely in a bank that is one of the top funders of fossil fuels. Until recently, many banks have managed to hide from the mainstream the magnitude of their role in the expansion of the fossil fuel industry. Fossil fuel companies need financing in order to start and sustain projects. The U.S. banks that finance the most fossil fuels are JP Morgan Chase, Wells Fargo, Citi, Bank of America, TD, Morgan Stanley, and Goldman Sachs, according to analysis from the Rainforest Action Network. These seven banks are also some of the most popular banks in the country, holding on to nearly half of American bank accounts. Banks play a role in giving the fossil fuel industry the cash they need to extract fossil fuels and commit acts of environmental destruction. And while it’s a great start for eco-conscious individuals to resolve to divest their money from the worst offenders (there are many banks and credit unions that don’t invest in fossil fuels), it’s equally important to think about what you want your money to fund instead. See the list below for alternatives.
Environmentally friendly banking options
There are several certifications or characteristics to look for when evaluating whether a bank aligns with your environmental values.
B-Corp Banks: Certified B-Corporations are businesses “that meet the highest standards of verified social and environmental performance, public transparency, and legal accountability to balance profit and purpose.” B-Corp banks are one option for people interested in a bank that aims to use its money and power as a force for good.
Global Alliance for Banking on Values (GABV) Members: The GABV is a network of financial institutions that use “finance to deliver sustainable economic, social, and environmental development.” Banks and credit unions in the GABV take a triple-bottom-line approach and serve as values-based banking options. Browse all B-Corp or GABV banks. Browse all GABV credit unions.
Environmentally focused neobanks, like Aspiration, ATMOS, and Ando: There are several new digital-only banking providers that partner with community banks to offer services. See our guide to evaluating cause-driven neobanks to learn more about the impact of money held with these banking providers.
Fossil fuel-free banks and credit unions: Though banks are not legally required to disclose all fossil fuel financing, several banks have made public commitments that they do not finance fossil fuels. At Mighty, we’ve invited banks to share this commitment with us, and state that they do not finance fossil fuel extraction or infrastructure. This means no lending or underwriting for projects like tar sands oil, Arctic oil, ultra-deepwater oil & gas, fracked oil & gas, liquefied natural gas, and coal.