Sustainable Banking: How to Make Earth-Friendly Choices With Your Money

Your dollars are your vote

In terms of the planet and climate change, your banking choice is more important than eating vegan, recycling, or avoiding fast fashion. "People don't appreciate the single most impactful thing they can do to help the environment is to put their money into sustainable banking," explains McNeill.

"According to a study done by the European bank Nordea, moving money to a sustainable bank account is 27 times more effective in reducing carbon footprint than if you flew less, ate less meat, took shorter showers, and took public transportation combined," says McNeill. "The single biggest thing we can do to help the environment is also the easiest."

We couldn't make the case for responsible banking any clearer than that. Shorter showers are great, eating less meat is helpful, and so is flying less, but none of that is nearly as impactful as simply switching where you put your money—and not providing funding for environmentally harmful projects. But McNeill, who obviously has skin in the game as the founder of an environmentally conscious banking service, isn't alone in expressing this sentiment. He is among a growing chorus.

"Banking is the most important thing you can do because you're turning your hard-earned money over to someone and trusting them not to do bad with it," says Grant Sabatier, CEO of BankBonus, a website designed to help consumers find the best bank accounts, savings accounts, and credit unions for their needs. "It's like a vote. People question whether their one vote matters during elections. And I think we have all seen now that yes it does. Your single vote matters. And when you're voting for a bank that does the right thing, it is having an impact."

Alternative banking services

So, what to do if you're looking to vote with your dollars? The good news is that a cottage industry of banking services focused on investing in environmentally friendly and sustainable projects is taking shape. San Diego-based Ando, which uses your money specifically to combat global climate change, is among the early leaders in the space.

Ando is radically different from its competitors in that it's the first completely transparent banking service that invests 100 percent of its consumers' money in carbon-reducing projects. Ando invests specifically in areas that make the most impact such as clean energy, sustainable transportation, green buildings, sustainable agriculture, and other essential green initiatives designed to preserve the planet for future generations.

"One-hundred percent of your checking and savings is used to finance green loans," McNeill emphasizes. "The money is used to finance sustainable farming, regenerative farming, electric vehicles…We are able to use the money over time in a number of different ways. That's why it is so impactful." And consumers can see how their money is being used by visiting the Ando app's Impact Center.

Another big name in the space is Aspiration, which encourages consumers to leave their current banks and help change the world. "There's a good chance your bank is using your money to fund oil projects that destroy the climate. Put your money where your values are." states the website.

"Aspiration is the quintessential millennial bank focused on sustainability," says Sabatier of BankBonus. "They don't invest in fossil fuels. From the ground up, that was why they were founded. When they launched, they had a bunch of high-profile celebrity investors like Robert Downey Jr. and Brad Pitt, and they have grown to 4 million accounts since 2015."

You're not sacrificing anything when you leave

While we're discussing alternative banking services, let's address the elephant in the room. Do these smaller providers offer the same options and convenience as the behemoths that have branches in every corner of your community? The good news is consumers sacrifice very little when opting to make a switch.

"There are advantages to banking with one of the largest banks in the world, but those benefits are significantly greater the larger your net worth is," says Sabatier. "For high-net-worth clients, [big banks give you] access to a wide variety of high-net-worth wealth tools, from advising to lending. A lot of these smaller, upstart, socially conscious options aren't going to have access to those types of products, but for the average banker that isn't going to matter."

Take Ando as an example. Its founder McNeill explains that his bank offers customers the types of options they want and expect: overdraft protection, a fee-free ATM network, and (in a move that's better than most banks these days) no monthly minimum balance or monthly fees. In perhaps the most notable departure from traditional banks, Ando offers customers up to five percent interest on savings accounts, which is largely unheard of.

If you do leave, be sure to explain why

The RAN report calls on banks (and all of us) to defund the progression of climate change. "The financial system is really entrenched in the climate crisis, and there is really a need to shift dollars away from funding climate crisis to funding solutions," says Oppermann of the Earth Day Initiative. "We need to start pushing financial institutions to start doing good with those dollars. Most people would be somewhat horrified if they knew they're funding the climate crisis. And unfortunately, that's the truth of it."

Oppermann urges consumers to let banks, as well as friends and family, know why they're shifting their money elsewhere. This ties back to the question "Does your one vote matter?" Yes, it does, and when you spread the word, votes start to add up.

"If you do it, and you talk about it and encourage other people to follow suit, you do start to see a critical mass not only in terms of dollars but also in terms of the conversation being had," Oppermann continues. "We have seen this with the Black Lives Matter movement and the Me Too movement. You think 'I'm just one person,' but at some point, it does reach a critical mass and start to shift. And it does start to impact those institutions if you're pulling your dollars. And it also sends a signal."

How likely are consumers to make a switch?

The larger question to contemplate perhaps, is "Do consumers care enough to make the switch?" A variety of encouraging signals indicate the answer to that question may very well be "Yes."

"We're getting more and more traffic from people interested in banks that are environmentally responsible," says Sabatier of BankBonus. He also notes that Google searches on the topic—socially responsible banks, socially responsible bank accounts, and sustainable investing—have been steadily ticking upward, which he sees as a proxy for consumer interest and demand.

"But do you also see a shareholder interest?" asks Sabatier. "That's the even bigger question. JP Morgan's profits are growing hand over fist, so do they care right now about consumers demanding a change? Banks are biding their time in that sense, as the wealth shifts from baby boomers to Gen Z and millennials."

The seismic shift of wealth that's looming on the horizon matters because, according to Sabatier, there's a much deeper sense of social consciousness among the younger generations. That may ultimately force the hand of banks to a tipping point that compels them to change their ways.

"Look at Aspiration; it grew to 4 million customers in just five or six years," Sabatier says. "Yes, Aspiration is great at marketing, but those numbers are also a testament to the increased interest in sustainability."

To be fair, some of the banks on RAN's list are already taking steps in the right direction. In April 2022, JPMorgan Chase pledged to invest $2.5 trillion in sustainable projects over the next 10 years, while Bank of America promised to spend $1 trillion on such projects between 2022 and 2030.

Perhaps big banks see the writing on the wall when it comes to a wealth shift on the horizon cited by Sabatier and others, reinforcing the importance of letting banks know why you're moving your money. At the least, you may want to join the chorus to call on big banks to make a change sooner rather than later.

"Do consumers care? It seems like they really do," says Sabatier. "The trend is increasingly shifting toward making more sustainable investments and banking choices. And Gen Z and millennials, in particular, are doing so because they want to make sure the planet remains a healthy place for them to live."

Finding the right bank

If you're curious about how your bank stacks up when it comes to funding the progression of climate change versus supporting renewable energy, there are various online resources, including those that can help you choose a green-energy-focused bank.

Start by visiting BankingOnClimateChaos.org, a 2021 report from RAN that scores banks based on their funding of the fossil fuel sector, including lending and underwriting of debt and equity issuances. Another option is the B Corp directory, a database of communities committed to serving global good, including banks.

A third resource is the Global Alliance for Banking on Values, where members can access a searchable map to find banks that use finance to deliver sustainable economic, social, and environmental projects.