How should I choose a bank? That’s a question many of us have asked ourselves at one time or another. Sure, there are the traditional answers about considering fees, interest rates, ATM networks, and customer service.
But what about the bigger factor: What will a particular bank do with your money? After all, the money you put in the bank doesn’t just sit there. It gets sent back out into the world to finance new projects and development—which is why what banks do with your money really matters.
Selecting what bank to use is a choice that has moral and social implications, and an impact on our world. Contrary to what stereotypes and history might suggest, there are various types of banks and financial institutions that are about more than pure profit. These include:
- Sustainability-focused banks
- Banks that are led by people of color, and largely serve communities of color
- Non-profit credit unions
- Fintech companies with social missions
- Community development financial institutions (CDFIs)
- Banks that are certified as B Corporations
Here, we’ll sort through this ecosystem of often-overlooked banks. The goal is to emerge with a better understanding of what’s out there, and thus become more empowered to make financial decisions that align with our values. Let’s dive in.
Banks with Sustainability Missions
“Money is the oxygen on which the fire of global warming burns,” the environmentalist Bill McKibben wrote in a landmark September 2019 essay for The New Yorker.
This is where banks and the future of our planet intersect. When banks and other institutions finance fossil fuels, they contribute to global warming. But there’s a flip-side to this, too: When banks don’t finance fossil fuels, they contribute to a more sustainable future.
That’s why more banks over the past few years have started considering the environment when it comes to what they do and don’t finance. But not all banks have made significant progress. The four biggest U.S. banks, for example, are the four biggest financiers of fossil fuels—worldwide.
The Rainforest Action Network (RAN) releases an annual report on how major banks’ financing policies and practices impact climate change. RAN’s most recent report shows the four biggest US banks have provided more than $974 billion in financing to fossil fuels companies over the past five years. In that same report, Bank of the West’s French parent company BNP Paribas received the second-highest overall policy score of all the banks included. (You can learn more about our policies here.)
When assessing a bank’s climate action. It’s important to watch out for greenwashing. And what is greenwashing? It’s when banks or other businesses distort their environmental record to curry favor with consumers. Ways to vet a bank’s environmental bona fides include:
- Give points for actions, not empty words: Any business can talk about goals or commitments, but do they have actual policies in place to hold themselves accountable?
- Check out the company they keep: Third-party validation from reputable environmental organizations can be valuable in determining whether a bank’s ecological record is respected by leaders in the movement.
- Honesty matters: Companies that have taken real action for the environment will often be more open about where they have work left to do.
The big takeaway here? When looking for a bank, it’s worth taking an extra moment to consider whether your deposits could be used to finance activities harmful to the environment. That’s your money being used to help—or harm—the planet. Banks with sustainability mission include:
- Bank of the West, which has the strongest environmental policies of any major U.S. bank and is the only major U.S. bank accepted as a member of 1% for Planet, Protect Our Winters, and The Conservation Alliance
- Fifth Third Bank, which serves much of the Midwest and has a strong set of environmental and social policies
- Beneficial State Bank, an Oakland-based institution that is dedicated to social responsibility and a triple-bottom-line philosophy
Black-Owned and Minority-Owned Banks
The NBA’s Atlanta Hawks made headlines in December 2020 by taking out a $35 million loan from a group of Black-owned banks—a first for the professional sports world. This bit of news may have also sparked some to wonder: What are Black-owned banks?
There’s more to it than just a literal reading of the phrase.
Predatory lending and discriminatory practices in the financial industry have historically been a force that impedes the economic mobility of Black people in the United States. Amid that context, many Black-owned banks focus on meeting the financial needs of underserved communities, whether that means providing capital for new projects or simply offering checking and savings accounts for everyday people.
The number of Black-owned banks in America has halved—from 36 to 18—over the past fifteen years, according to The Wall Street Journal, but a movement is afoot to reinvigorate this often-overlooked segment of the finance sector. If you’re interested in finding one near you, Mighty Deposits has a good list of Black-owned banks and credit unions. Some of the largest Black-owned banks include:
- Liberty Bank, based in New Orleans
- OneUnited Bank, based in Boston
- Carver Federal Savings Bank, based in New York City
There are other minority-owned banks, too—Hispanic-owned and Native American-owned, for example—which seek to provide their own communities with better access to the financial system. The Federal Reserve of Chicago has an interesting article on the history and reach of minority-owned banks if you want to take a deeper dive. According to that article, the first Asian and Hispanic-owned U.S. banks were established in the 1960s, while the first Native American-owned bank on a reservation was established by the Blackfeet tribe in the 1980s.
Credit Unions vs. Banks
You may have seen credit unions around your city and wondered, “What’s the deal with that?” Well, wonder no more.
Credit unions are bank-like services that have existed for more than a century. The key difference is that, unlike banks, credit unions are non-profit by definition. But drawbacks to using a credit union include fewer branch locations and a slower adoption of new technology.
Some credit unions are dedicated to specific social missions such as using deposits to invest in local businesses or affordable housing. This is a useful tool for exploring the various focuses of different credit unions around the country. Credit union options include:
- Redwood Credit Union, which serves more than 378,000 members in eight Northern California counties
- Los Angeles Federal Credit Union, which serves much of Southern California and was started by L.A. city employees during the Great Depression
- San Francisco Federal Credit Union, which serves people in San Francisco and San Mateo counties
In recent years, mobile-focused fintech companies have started offering some of the same services as banks. However, many of these firms aren’t technically banks because they don’t fall under the regulatory scope that monitors the banking sector. Unlike with banks, deposits made with fintech companies are typically not insured by the Federal Deposit Insurance Corporation (FDIC). However, the fintech company might pass your deposits on to an actual bank that is FDIC-insured.
While they do offer slick user interfaces, there can be drawbacks to using fintech companies. These drawbacks can include that they typically don’t have any options for in-person service like banks do via branches, and that they typically have fewer different types of accounts compared to banks.
Not all fintech companies tout specific social missions, but some do. Examples include:
- Aspiration, which promises not to use deposits to fund fossil fuel projects
- Current, which seeks to serve teenagers and others who are overlooked or underserved by traditional banks
- Wealthfront, which seeks to simplify and demystify investing for everyday people
What About CDFIs?
A CDFI—or community development financial institution—is a private-sector organization with a focused mission to serve people and communities that have historically not had access to the financial system. Different CDFIs often have different specializations. These can include:
- Retail and consumer needs
- Venture funding for small and medium sized businesses
- Financing for microenterprises and the self-employed
Opening an account or taking out a loan with a CDFI helps support their mission and the communities they assist; your deposits could become a loan to someone else in need. At the same time, drawbacks to using a CDFI can include fewer branch locations, fewer ATMs, and a more regional scope.
CDFIs exist in all 50 states—the Treasury Department’s CDFI Fund site can help you locate one near you. You can also learn more through the CDFI Coalition. Options include:
- Opportunity Fund, which serves a client base of entrepreneurs who are 90% women, people of color, or immigrants
- Rural Community Assistance Corporation, which provides financial services for small businesses, affordable housing, nonprofits, and other groups located in rural communities
- Community Bank of the Bay, which invests in local Bay Area communities and supports environmentally friendly projects
B Corp Banks
Certified B Corporations meet rigorous social and environmental standards while seeking to turn a profit. Companies from a vast array of sectors have been certified as B Corps, including some in banking and financial services.
These are usually CDFIs, smaller community banks, and online fintech companies. If those types of institutions can meet your banking needs, a B Corp might be right for you. You can search for certified B Corps in finance—or any other industry—through B Lab, the non-profit that certifies businesses as meeting the necessary criteria.
Tools for More Research
In addition to the B Lab site, there are several online tools that can be useful if you want to do more research into socially and environmentally responsible banks. Here are some resources to get you started.
- Mighty Deposits offers a pretty comprehensive look at what various banks do with your money. You can explore by region, social mission, and more. Its simple search tool can help find a bank near you that is dedicated to sustainability, is women-owned, is above average in housing lending, or meets other specific criteria important to you.
- The Rainforest Action Network puts out an annual report examining how much the world’s 60 biggest banks finance fossil fuels. It’s a useful resource for anyone interested in the connection between finance and global warming.
- Stop the Money Pipeline is a coalition of climate justice and environmental advocacy groups that works to hold accountable financial institutions that bankroll fossil fuels. Its site is full of information for those seeking to learn more about the subject, and even recommends a handful of options for those looking to move their money.
Hopefully you now have a better understanding of the ecosystem of banks that exist for more than pure profit. If you think the time is right to make a change that aligns your money with your values, here’s a primer on how to switch banks in just a handful of steps.