“Impact” seems to find itself at the head of many investment product titles. Financial institutions are quickly learning that their customers increasingly care more about the impact investments have on the environment and broader society. No better proof is the Business Roundtable’s statement that corporations should also provide a social return in addition to profits or the many candidates running for president putting forward big ideas on how to change the economy.
As financial intuitions respond to this changing tide and customers have increased their awareness, more money is flooding into investment that have an environmental, social, and governance (ESG) responsibility. Yet, as The Wall Street Journal recently noted that there is a lack of consensus on how to measure the double or triple bottom line impact of those dollars.
I ask, how does a new comer to the ESG investing space navigate these emerging dynamics and get started?
As a new investor it can be tough to see the difference between greenwashing and legitimate impact. One thing we know for certain is that before any investment dollars are reallocated, moving your banking to a mission aligned financial institution, like Amalgamated Bank, is the first step in impact investing.
Choosing a bank that aligns with your values is the first step to ensuring your money has a social impact on the world. Everyone needs a bank to process payments, keep money safe and help earn return. Every business, nonprofit, and foundation needs a banking partner to manage their money. Banks are an everyday necessity and perform a core function of our economy. We all trust them to do right by our money and our communities.
The bank you choose should reflect your values. We apply the same thinking to other basic purchases like the food we eat or the car we drive. Why not apply your values to who is trusted to care for your money?
When you make a deposit in a bank – either through your paycheck or the money that grandma gave you for your birthday – that money is lent out to borrowers who need it. Banks have many different types of borrowers from mortgages, to credit cards, to corporations, and more. Your deposits give power to the bank to make decisions about who should receive a loan or not. The bank acts on your behalf to invest those funds into certain businesses or business owners.
Have you ever asked your bank where they lend your money?
The lending decisions that banks make set forth the next decade of our economy. Stagnate wages, eroding benefits for workers, and a hotter than ever planet necessitate smart, values aligned decisions about how we build a new, more inclusive economy.
Sometimes people don’t know that their bank is contributing to a perilous economy. We often think it’s just Wall Street as the bad actor. That’s why we see so many people seeking to change their investment strategy. Yet, banks are the financial plumbing behind the scenes.
Since the Paris Climate Accords in 2015, banks have invested nearly $2T in fossil fuels even as the evidence is overflowing as to the damage that causes our planet. Banks provide working capital to gun manufactures, private prisons, tobacco companies, and other extractive industries.
So, before you begin to weed through the messiness of ESG investing, why not start with the most straight forward step and switch your bank to one that is explicitly aligned with your values? Choosing a different bank is a giant leap towards ensuring your family or your businesses’ financial future and quality of life. No better day than today to make the switch.