Leave your bank. Change the world.
That’s the promise the Los Angeles-based financial firm Aspiration has used to entice millions of customers over the past six years. The company’s pitch to climate-savvy consumers? They can slash their carbon footprint by taking their dollars out of banking giants—which are deeply invested in fossil energy—and opt for its services instead.
Launched in 2015, Aspiration offers savings accounts, debit cards, investment options and more. Some of those services, the company promises, come with perks for the planet. For instance, every time a customer swipes their debit card, Aspiration says, it plants one tree.
The approach has found an audience: Aspiration boasts more than 5 million clients, a number that’s more than doubled over the last year and a half.
The financial technology company isn’t alone in its goal or message. It’s among a modest—but growing—number of financial businesses that market their services as climate-friendly. As part of that movement, a wave of community banks, credit unions and regional lenders are denouncing Wall Street lenders’ contributions to climate change and offering consumers an alternative.
These climate-focused firms vary widely in their approach and background. They differ in size and institution type, and have adopted a diverse set of models, business plans, focuses and theories of change.
But what they do share, sources say, is a collective vision for a lower-carbon economy—and a goal to capture a consumer base that’s growing increasingly concerned about the cash conduit between the financial sector and the world’s largest emitters.
“This is one of the most talked-about issues right now among people who are thinking about banking with intentionality,” said Megan Hryndza, the CEO of Mighty Deposits, a website where consumers can search for banks that align with their values.
“Each of these are completely different financial providers, and so they’re all going to come at it a little bit differently,” Hryndza added. But ultimately, she said, “they’re all competing for green deposits.”
A range of options, ‘a ton of marketing’
The green banking universe includes several different types of institutions, divided roughly by size.
At the top are midsize but mainstream lenders that are working to enter the sustainable banking space by adopting strict environmental lending policies and marketing themselves as an alternative to Wall Street firms.
One step down, there are banks that are smaller, are oriented around sustainability and specialize in supporting progressive and climate-friendly projects, groups and causes.
Then there are more local firms that provide financing to nearby communities and are generally too small to be doing business with fossil energy companies anyway.
A fourth and final approach is by financial technology companies that aren’t technically banks but provide consumers with easy access to financial services that also happen to be climate-friendly.
“A lot of the options probably fall into one of those four categories right now,” said Ivan Frishberg, an executive vice president and director of impact policy at Amalgamated Bank, a sustainability-focused firm based in New York.
“It’s all good, and the more this moves the banking industry to be aligned with our sustainability needs, then that is great,” Frishberg added. “But it’s tough to be a consumer in this space because there’s just a ton of marketing.”
Consider a few options.
Bank of the West, a U.S.-based firm owned by banking giant BNP Paribas, is a notable example of the first category—mainstream lenders with an appetite for climate-conscious clients. With nearly $100 billion in assets, the midsize firm says on its website that it’s “fundamentally different” from the four largest U.S. investment banks, which it notes “finance 30% of all fossil fuel expansion globally.”
Asked by E&E News what makes Bank of the West “fundamentally different,” Ben Stuart, the firm’s executive vice president and chief marketing officer, provided several examples.
For starters, Stuart said the firm offers its clients a checking account that donates 1 percent of net revenues generated by the account to an environmental nonprofit and tracks the carbon footprint associated with each purchase. Also important, he added, is that the bank has “near zero exposure to fossil fuels.” (Environmental groups have taken issue with that claim on the grounds that BNP Paribas, the firm’s parent company, is one of the world’s largest banks—and green groups including Rainforest Action Network and the Sierra Club in March released a report on climate and banking naming it the 10th-largest fossil fuel financier.)
But perhaps most important in Stuart’s eyes is that in comparison to other major U.S. firms, Bank of the West has implemented some of “the strongest environmental policies in terms of what we do and do not finance.” That includes policies that restrict or prohibit the company from financing coal-fired power plants, fracking wells, Arctic drilling, palm oil, tobacco, wood pulp and more.
“If you look carefully at what large U.S. banks are saying, you’ll see a lot of words like ‘pledge,’ ‘promise’ [and] ‘commitment,’” Stuart said. “But if you scratch and see what policies have been implemented, what type of governance exists, I think that is where it changes from being a perceptual battle to an operational reality.”
Amalgamated—which is far smaller than Bank of the West—is a good example of the second category. With approximately $6.6 billion in assets, the firm is the largest union-owned lender in the United States and calls itself “American’s socially responsible bank.”
Amalgamated promises its customers that their deposits will never be used to finance major emitters. It also touts its clean energy portfolios and the financial services it provides for environmental organizations, progressive political campaigns and renewable energy projects.
But according to Frishberg, what really sets the bank apart is its sustained advocacy for public and private initiatives that aim to address the financial system’s contributions to—and risks from—global warming.
In recent years, Amalgamated has been credited with adapting to the North American market a climate finance-focused initiative that was originally based in the Netherlands. The effort, which is called the “Partnership for Carbon Accounting Financials,” aims to develop and spread a standard methodology that financial firms can use to measure the carbon emissions associated with their financing activities (Climatewire, March 31).
“Our ability to do things like put carbon accounting onto the map and build it into the financial system” is what makes Amalgamated “very comprehensively mission-aligned,” Frishberg said.
Climate First Bank
Then there are even smaller firms, including banks and credit unions, that are locally based, community-focused, fossil fuel-free and, in some cases, devoted to sustainability.
“The expansion of the fossil fuel industry is driven by banks that are equipped to fund what are often global drillers,” said Hryndza of Mighty Deposits. “Just by sheer notion of how they’re structured, community banks can’t [do the same].”
Take, for instance, Climate First Bank, which is based in St. Petersburg, Fla. The firm opened its doors in June, said it was carbon neutral on day one and aims to “become the most impactful bank contributing to the draw down of atmospheric CO2.”
Ken LaRoe, the firm’s CEO, said in an interview that it’s still early but that the bank aims to provide run-of-the-mill financing to families and businesses in the surrounding community—as well as lending for “anything that will help reduce atmospheric CO2.” That could include solar and energy efficiency retrofits.
Climate First Bank isn’t alone. There are many small-scale lenders that have similar missions and, in some cases, marketing, such as the 11 U.S.-based firms that are members of the Global Alliance for Banking on Values, or GABV, a sustainability-focused industry group.
But at the same time, there are other financial institutions that are similarly fossil fuel-free, but don’t market themselves that way, said Erin Sherman, a vice president of Ideas42, a nonprofit that helped launch an online tool to connect consumers with fossil fuel-free banks.
“For example, most credit unions fit that criterion but don’t speak about themselves as a climate-friendly financial institution,” Sherman said. That can be the case, she added, because many community banks are underresourced and lack the technology necessary to provide sustainability-minded consumers with modern and accessible green banking options.
Which is where Aspiration can step in. The firm has all the same features of a traditional bank, even though it isn’t one itself. Instead, the financial technology company takes customer deposits and routes them through small community banks across the country that have been certified as fossil fuel-free.
“But then we go further,” said Andrei Cherny, the company’s CEO.
Aspiration does so, he said in an interview, by providing customers with personal sustainability scores that monitor the climate impact of their purchases, in addition to various opportunities to offset the emissions associated with daily purchases and activities.
When customers opt into the “Plant Your Change” service, for instance, Aspiration rounds up the value of each transaction made using the company’s debit card to the nearest dollar. The excess amount is then transferred to an account that is used to plant trees via partnerships with verified carbon credit and offset companies including Cool Effect and 3Degrees.
According to both companies’ websites, their offerings come from carbon projects that have been certified by at least one of the major international carbon credit standards, such as the Gold Standard, Climate Action Reserve or the American Carbon Registry.
“People are really looking for what they can do on a daily basis, how they can actually make a positive impact and do something that is at once easy but also meaningful,” Cherney said.
“And I think that’s why a lot of people are coming to Aspiration,” he added. “In five minutes, they’re able to move from whatever big bank checking or savings account they’re currently at that is almost certainly using a significant chunk of their deposits to fund oil and gas pipelines and drilling to an Aspiration account, where it’s guaranteed to be fossil fuel-free.”
In Hryndza’s eyes, Aspiration’s model works because it closes the gap between climate-minded customers who want a modern banking experience, and fossil fuel-free banks that may not have the resources, technology or reason to market themselves as such.
Aspiration is effectively “eliminating that technology question,” she said. There is “evidence that this market is here, has been here for a while and is growing.”
But what’s the impact?
Less certain is the extent to which demand for green banking—and the range of options popping up as a result—could curb the financial system’s contributions to climate change.
“The GABV banks and the [financial technology companies], if you put all that stuff together, it’s not huge,” said Frishberg, of Amalgamated. “So, the question is: Are we doing things that are really changing the way the banking system works?”
Seven bankers, experts and advocates interviewed for this story had a range of answers to that question.
Most noted that the sustainable and fossil fuel-free banking space is largely composed of firms that are orders of magnitude smaller than traditional banks, some of which wield trillions of dollars in assets. And those major lenders, sources say, aren’t necessarily going to be pressured to cut ties with oil and gas firms just because customers are dropping them in exchange for a greener option.
“These really large financial institutions sometimes don’t make a lot of money from ordinary consumers’ deposit accounts,” said Sherman, of Ideas42. “So even if a given campaign or tool could help a lot of people move their money, if all they did was move their money, it might not have that much of an impact that would resound or echo or have secondary effects.”
“But if a lot of people moved their money with some noise attached, the reputational dimension of that could be impactful,” Sherman added. “No great political or social change ever happens without that sense of a critical mass being reached.”
Ben Cushing, who heads the Sierra Club’s finance campaign, echoed that point. He emphasized that when it comes to pushing a banking giant like JPMorgan Chase & Co. in a greener direction, the threat of losing retail customers could play a role, but it probably would not be the biggest factor.
For that reason, he said, finance-focused environmentalists have used a wider range of strategies. Those include spearheading major petitions, making thousands of phone calls to Wall Street CEOs, protesting outside bank branches and headquarters, and asking members of the public to loudly switch their bank accounts.
In that way, Cushing said, advocates can be sure the largest fossil fuel financiers “feel pressure from customers, society at large and their shareholders and investors.”
Frishberg agreed. As he sees it, advocates and climate-focused firms are both working to generate “a whole societal conversation about ... what is the license we gave to these banks and does it include funding this stuff that’s going to kill us. "
“We’re trying to move the whole ecosystem,” he said.
Reprinted from E&E News with permission from POLITICO, LLC. Copyright 2021. E&E News provides essential news for energy and environment professionals.