Building a greener future through community banking

Learn how credit unions and banks can embrace green banking practices to positively impact their communities.
Dec 16, 2021
Laura Caseley
Content Writer

With the steady rise of extreme climate events all over the world, sustainability, eco-friendliness, and environmentally responsible products and practices are at the forefront of many minds. But for smaller, community-scale businesses, the idea of “going green” can conjure up some worries of its own; namely that green initiatives are expensive and can lead to financial loss without much positive impact. The result is that many businesses, including financial institutions, shy away from these practices. 

But there’s reason to be optimistic. For one thing, community banks and challenger banks, and in particular credit unions, have been quietly leading green initiatives for a long time. They’ve provided multiple opportunities for members, businesses, and investors to make sustainable – and profitable – choices. Credit unions were also recently added to SBA’s lending program for climate change. However, many institutions, especially large ones, are still shortsightedly resisting green initiatives and even supporting damaging industries like fossil fuels. So it’s up to community banks, credit unions, and fintech companies to lead the charge to a greener future. 

Community banks and credit unions can be seen as leaders of green innovation, and create opportunities for other businesses to do the same. Doing so will not only generate a greener economy and healthier environment, but also support local economies and communities with very real and tangible payoffs. 

Sustainable economic models are becoming the norm.

What is a sustainable economic model?

A sustainable economic model is "one that is resilient and provides a good quality of life for everybody. It stays within the limits of the planet and helps keep global warming well below the 2°C threshold" according to the WWF

As climate concerns mount, sustainable economic models are becoming more and more mainstream in all industries, and are likely only going to continue growing in popularity. In fact, the movement towards sustainable economic models is projected to create $12 trillion in economic opportunities by 2030. In addition, new regulations surrounding ESG (environmental, social, governance) disclosures are pending, meaning that corporations and businesses will have to be upfront about their climate footprints. All of these large-scale changes mean that green initiatives and climate-conscious business practices are not a passing fad, but rather an emerging ‘new normal’ in the business world. For example, ESG disclosure regulations will likely facilitate a shift away from lending to and investing in industries that do not adhere to sustainability policies, especially in the U.S., but whatever the trepidation, dedication to sustainability is always good in the long run

Customers are increasingly interested in supporting green businesses.

It’s not just governments and international organizations that are trending green, either. Everyday consumers are also growing more interested in supporting green business in all aspects of life, from food to retail to banking and finance. Nielsen Media Research reports that 66% of global consumers (and 73% of millennials) are willing to pay more for products if they are environmentally friendly. That means that when consumers see a business as environmentally and socially responsible, they are more likely to buy their products, even at a higher price. 

As a result, many businesses have put their green efforts at the forefront of their marketing. For example, Aspiration Bank uses their green initiatives as a major selling point. Investments into green businesses and practices have also jumped more than tenfold in just five years, with millennial-aged investors leading the way and taking sustainable investing from a $5 billion to a $51.1 billion market from 2015 to 2020. And it’s brought people of all ages into the area, too, with a Morningstar poll showing that 72% of the U.S. population was interested in sustainable investing. And while Gen Z has yet to establish measurable investment habits, Cone Communications found that a staggering 94% of them are concerned with how their choices impact the environment, and believe that companies should act responsibly in regards to the environment as well.

Institutions are already facilitating green business.

As a community bank or credit union, taking on climate change might seem like an insurmountable feat. But it’s not. Starting with a local and community focused approach is a great way to make a real and lasting difference that benefits not just the environment, but communities, individual lives, and the banks and credit unions themselves. Luckily, many financial institutions have already blazed the trails in terms of green initiatives, providing inspiration and guidance for others. 

Investment in green business practices have been shown to drive growth and mission-driven impact, especially for credit unions.

An easy first step for institutions is to look within and assess their carbon footprints, waste, and energy consumption, and explore options to reduce or mitigate these. Ando Bank, for example, offers a debit card made from 80% less plastic than the average card. Not only does this help save money and reduce consumption, but it can also serve as a demonstration for other businesses in the area, establishing the institution as a thought leader. 

On a larger scale, banks can also help client companies reduce their carbon footprints and provide opportunities for carbon offsetting. In Spain, BBVA is helping both businesses and individuals monitor and reduce their carbon footprints, something especially vital to larger companies. 

Many green challenger banks are also divesting from fossil fuel investment, choosing instead to put their money into green, renewable energy, with some, like Ando Bank, even showing customers exactly how much of their money goes to which types of energy. 

Granting loans to homeowners and small, locally-owned businesses is another way financial institutions can help communities thrive and get a little greener with loans for renewable energy upgrades. These loans also empower often underserved and overlooked populations. 70% of City First Bank’s loans go to affordable housing, nonprofit community organizations, and small businesses in Washington, D.C., and Los Angeles. Meanwhile in Portland, Oregon, the $9 billion OnPoint Credit Union offers discounts on loans for solar panel installation and electric or hybrid vehicle purchases. 

Another way to keep the environment in public thought is through being vocal. Green initiatives may be increasingly commonplace, but they’re still newsworthy, and showcasing their availability and success rates is crucial to inspiring other businesses to take them on – all while providing positive publicity and attention for the institution, and supporting emerging green tech. Barclays U.K., for example, provides financing to renewable and efficient energy and sustainable transport. 

Greener business means better business, but also a better world.

It might seem like supporting local businesses or supporting green initiatives are too small to make much of a difference, but that’s simply not the case. In the face of climate crises, every action really does count, whether it’s financing renewable energy or learning about how to help customers financially recover after natural disasters. It also allows for even the smallest of communities to join a global effort in stemming climate collapse and making a difference for generations to come.

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Building a greener future through community banking