The value of values-based banking

“Social responsibility” is not something commonly associated with the financial sector by most Americans. In the wake of the 2008 financial crisis, banking has consistently received some of the lowest consumer approval ratings of any industry in the country. Unfortunately, the recession spurred by the housing collapse of 2008 was just one in a long chain of perceived misdeeds by members of the banking community. Nearly every month, Americans confront news of more corporate malfeasance, and more bad behavior by bankers and financial institutions looking to put their own profits ahead of their customers’ best interests.

Though the industry as a whole has a long way to go before it truly earns back the trust of its customers, a select few institutions from the United States and beyond are dedicated to using finance as a tool for social good, rather than solely as a means to make a profit. These financial institutions assess investments, products, lending and other services for their ability to help foster positive and sustainable economic, social and environmental development.

These “values-based banks” see sustainable development as essential to their business and operating models. For consumers, it can sometimes be difficult to see the link between where a checking account is opened and how the bank where it’s opened can affect broad, ambitious and positive social change. But the foundation of banking is the deployment of deposit dollars as loans to individuals, businesses, non-profits and governments. That means that the larger the deposit base – that is, the more customers a bank has – the more influence a bank can exercise over companies and communities through loans, investments and direct contributions.

Despite the public image of banks as a whole, values-based banks more often forego short-term opportunities for profit in favor of sustainable, forward-thinking investments and services that actively improve the communities they serve.

As an institutional shareholder, Amalgamated has forced companies like Lumber Liquidators, major energy utilities and others to acknowledge flawed corporate policies and take dramatic steps to put their customers’ best interests first and foremost. At our own organization, we have partnered with social justice advocates to fight for just and fair policies. For example, we instituted a $15 wage internally, and helped make it the law of the land in both New York and Washington, D.C.

We have demonstrated repeatedly through our investment portfolio that financial institutions are capable of both delivering sustainable profits for their clients, and simultaneously investing in companies and projects that serve a greater social good.

Customers might be wary of a bank that admits it doesn’t put short-term profits first, but plenty of empirical data support the foundation of values-based banking. Beyond being able to appreciate the social value of responsible lending and investment, values-based banks take a forward-thinking and long-term view of their operations.

A Global Alliance of Banking on Values study of financial performance before, during and after the 2008 financial meltdown, comparing the world’s 28 “Global Systemically Important Financial Institutions” (GSIFIs) to 22 “sustainable banks,” firmly demonstrates a “values-based” approach to banking leads to a more stable institution overall in terms of returns on assets.

We believe banks can and should be a force for positive social change. Using our position as lenders and investors, we can wield our influence to both protect the economic well-being of our customers and promote policies and laws that will result in a fairer, more sustainable world for all. Banking with values is both the most reliably stable and socially responsible way to approach our business, and we’re proud to help lead the way for our industry.