Environmentally and Socially Responsible Banking – How Do Banks Spend Your Money?

Bank Funding Practices

Perhaps unbeknownst to many checking and savings account holders, large and often controversial projects around the world are funded by banks. There has been a renewed surge of interest and concern about financial investments by banks, financial institutions, and Wall Street, driven in some part by media coverage of the Dakota Access Pipeline project (DAPL). Colleges, Cities, and States divesting from companies associated with the funding and construction of DAPL has made some re-think where and how their own money is being put to use.

Much of the focus centered around Wells Fargo Bank, which was also hit with uncoverings of predatory loans, discrimination, and the opening of accounts without customers knowledge. While much of the evil bank stigma landed on Wells Fargo, it is far from the only participant in unsavory practices. In fact, nearly all of the most recognizable big banks are involved in controversial investments including the funding of private prisons, oil pipelines, and foreign projects like the Three Gorges Dam on China’s Yangtze River.

Bank Funded Projects

Large multi-national banks offer convenience and some nice perks, but you might not be aware (or like) what the bank is doing with your money.

Wells Fargo has expanded its stake in the GEO Group, the second largest private jailer in America. At the end of 2011, Wells Fargo was the company’s second-largest investor, holding 4.3 million shares valued at more than $72 million. [Salon]

Wells Fargo has dominated the news in this area, but it isn’t the only offender. Bank of America, US Bank, PNC, Barclays, JP Morgan Chase, Deutsche Bank, UBS, HSBC Bank, and more are all funding the DAPL, private prisons, coal and oil extraction projects, and even politicans.

“These institutions are undermining their own climate goals by funding massive and risky fossil fuel infrastructure that tramples community rights”
-Alex Doukas, research nonprofit Oil Change International [via Huffington Post]

By moving your checking and savings accounts to a smaller local bank or credit union, your money can have a bigger effect on local projects and often give you more of a say in investment activities.

Local Community Banks

Local and community banks tend to be more invested in local businesses and projects, but are still for-profit institutions which use customer deposits to create profits by investing or loaning to other customers. Similar to corporate banks, community banks are owned by investors and operated to maximize profit for those investors. Customers don’t have voting rights in major decisions and have very limited control over how the bank is operated.

Community banks may have more of the communities interests in mind but have limited accountability to their customers due to their structure. For many reasons, credit unions are the best option in terms of responsibility and accountability while at the same time benefiting the individual member as well as the community.

Credit Unions

Unlike banks, credit unions are non-profits governed by their members, many of whom volunteer to serve as board members, committee members or in other roles. Each deposit is a further investment in the company, and as a member-owner, you have a right to vote on major decisions affecting the credit union.

Unlike banks, credit unions have never needed a taxpayer funded bailout

Credit union profits are typically returned to the member in the form of lower fees, better rates on savings and loans, and end of year dividends. Plus, access to ATMs outside your branch area is generally easier due to the non-competitive co-op nature of credit unions.

By choosing where to place your money, you are also making a statement in what you value. Now armed with this knowledge myself, I plan on moving my money out of the Bank of America accounts I’ve had since 2002, into a credit union.

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