Ethical Banking: The Top Socially Responsible Banks

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Written By Aaron Hurd Contributor

Aaron Hurd Contributor

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Kim Porter began her career as a writer and an editor focusing on personal finance in 2010. Since then, her work has been published everywhere from Forbes Advisor to U.S. News & World Report, Fortune, NextAdvisor, Credit Karma, Bankrate, and more.

Published: Sep 1, 2022, 10:00am

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Ethical Banking: The Top Socially Responsible Banks

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If you consider yourself a conscientious consumer, you’re likely aware of the impact your purchasing decisions can have, so you make thoughtful choices about how you spend your money. You may pay more to buy local produce, seek more durable and long-lasting goods, or ensure that the clothes you wear are ethically sourced and produced.

But have you thought about the money sitting in your savings account? Is it staying aligned with your principles?

If you believe your money should support your values while you save it, you may want to explore the idea of ethical, or socially responsible, banking.

What Is Ethical Banking?

Ethical banking is the practice of choosing financial institutions that implement socially responsible investment policies and business practices.

A more socially conscious bank may, for example, have a policy against investing in carbon-generating sectors or businesses that engage in exploitative labor practices.

Some banks invest in companies or organizations focused on environmental sustainability, community development or social justice. These banks are typically transparent about their business practices as part of a holistic commitment to their stakeholders.

What Are the Ethical Issues in Banking?

Socially responsible banks generally choose to highlight specific causes and line up their investment policies and business practices around them. Here are three examples of issues that receive financial attention through ethical banking.

1. Banking Access and Community Development

More than 5% of U.S. households are “unbanked,” meaning they have no checking or savings account, according to Federal Reserve and Federal Deposit Insurance Corporation (FDIC) data. The agencies say people of color and low-income families are more likely than other Americans to be unbanked, because they often have difficulty affording traditional banks’ fees for overdrafts, low balances, ATM withdrawals and more.

Banks that seek to help these consumers by catering to their communities are often designated as community development financial institutions (CDFIs).

More than 1,000 CDFIs operate nationwide, with support from the Community Development Financial Institutions Fund. The fund was created by Congress in 1994 to promote economic revitalization and community development in low-income communities by helping banks, credit unions and other financial institutions provide capital and credit in those areas.

2. Environment and Climate Change

Some socially conscious banking customers don’t want their money invested in oil companies and energy exploration. Banks with an environmental focus typically bar themselves from investing in industries linked to climate change, and they may actively support organizations that demonstrate positive environmental impacts.

A few environmental groups offer certification programs for banks and corporations looking to demonstrate their commitment to positive environmental change.

Bank Green offers “fossil free” certification to banks that the group says do not finance fossil fuel companies or projects and have pledged not to do that in the future.
1% for the Planet has a membership program for businesses that donate the equivalent of 1% of their gross sales directly to environmental nonprofits. The organization reviews and certifies member donations annually.

3. Holistic Social Responsibility

Some banks support a combination of environmental, social justice and community investment initiatives while making a commitment to stakeholder responsiveness and transparency. To take a more holistic approach to social responsibility, a bank may:

Become a “B Corporation.” These are businesses certified by B Lab, a nonprofit that helps companies become greener and more socially responsible. To receive B Corp status, a bank must meet environmental and other standards, have a corporate governance structure that responds to all stakeholders, and exhibit public transparency.
Join the Global Alliance for Banking on Values. The alliance is a network of financial institutions that focus on sustainability and social and environmental development. The group has 11 member banks and credit unions in the U.S.

How Does Ethical Banking Work?

How each ethical bank displays its commitment to social responsibility will differ, but there are similarities to their approaches.

Most socially responsible banks publish information about their investment policies. This typically includes a pledge to avoid investing in sectors with negative environmental impacts or companies the bank believes have unethical or exploitative business practices.

Many of the banks also actively support businesses that are local or minority-owned, or meet environmental or ethical business standards. And, they often commit to using profits for good. These commitments can include grants to organizations, political support for causes like human rights or social justice, or ethical business processes and transparency in operations.

The banks may pursue certifications from third parties that audit their commitments, policies and charitable giving.

Which Banks Are Ethical?

Many banks demonstrate their commitment to social responsibility through their business dealings, investment policies, community involvement and public endorsement of important causes.

Here are four examples of banks often cited for their ethical business practices.

1. Aspiration Financial

Aspiration Financial focuses on its environmental impact and promises it will never use your money to “do things like build oil pipelines, mine for coal or drill in the arctic.” In addition, Aspiration lets customers round up purchases and donate the extra amounts to reforestation initiatives.

The company has a tool called Aspiration Impact Measurement, which provides a personalized sustainability score based on where you shop. Aspiration is a certified B Corp and a 1% for the Planet member.

2. Sunrise Banks

Sunrise Banks is a Minneapolis-based financial institution that claims to be “The World’s Most Socially Responsible Bank.” Sunrise’s 2021 impact report highlights its alternative mortgage program for borrowers who wouldn’t qualify for a traditional mortgage; the $135 million in paycheck protection program (PPP) loans it disbursed as part of pandemic relief; and its commitment to financial literacy programs for low- and moderate-income students.

Sunrise Banks is a certified B Corp, a certified community development financial institution and a member of the Global Alliance for Banking on Values.

3. Amalgamated Bank

Amalgamated, founded by a labor organizer and union leaders in the 1920s, says its mission is to further “economic, social, racial and environmental justice.”

Amalgamated Bank was the first bank to publicly endorse a bill in Congress that calls on the federal government to form a commission to investigate paying reparations to African Americans. It has also received a top score in the Corporate Equality Index from the LGBTQ advocacy group the Human Rights Campaign.

4. National Cooperative Bank

National Cooperative Bank claims to be the only bank in the U.S. “dedicated to delivering nationwide banking products and solutions to cooperatives and other member-owned organizations to help communities thrive.”

The bank uses its loans and investments to increase the availability of local food, expand access to health care, create affordable housing and build renewable energy. NCB says it made loans and investments in 2021 totaling $456 million that benefited low and moderate-income communities.

Where Do Ethical Banks Invest Their Money?

How an ethical bank invests depends on its priorities. Some make a commitment against investing in fossil fuels, or actively invest in organizations that promote environmental sustainability. Others focus on making local investments in food, health care, transportation and housing.

Some originate loans to small business owners or direct money into underserved communities. Yet others provide grants and funding to organizations promoting causes such as social justice or financial literacy.

When looking for a socially responsible bank, look for a financial institution that aligns its investment priorities with your own. A bank that claims to be socially responsible should be transparent about where it invests its customers’ money.