Listen closely: A faint drumbeat builds in intensity and volume. Listen closely: You can hear consumer activists, politicians, commentators from the left and right, and competitors as they highlight what they view as the improper actions of banks.
These voices demand that banks change how they operate, sometimes in fundamental ways. Most banks seem to ignore the green bank revolution—that is, the movement among some financial institutions to accelerate the deployment of clean energy technologies and the transition to a low-carbon economy.
But in green banking, there is opportunity to project a positive message that’s also profitable. Banks can get ahead of this issue when they examine their current activities, rethink strategic focus, retool how they serve customers—and prepare the content of their corporate messaging.
The costs of standing still could be high. Some of the business areas banks now rely on for profits may turn out unsustainable, given pressure from an increasingly vocal and interconnected group of customers.
That said, banks can deliver an impactful message—and make themselves stand out—by getting in on the green revolution while there is still time.
Setting the stage: The erosion of bank prestige
I grew up during the time when people respected banks. You lowered your voice when entering a branch, as though inside a library or a church. Now whether justified or not, banks have been under constant attack from the media and social action groups.
The 2019 Edelman Trust Barometerreport found that financial services (again) was the least-trusted industry, at 57 percent. (Compare that, for example, to education at 70 percent.) In fact, financial services has lagged behind all other sectors since at least 2014. Fueling this in part is the view that some bankers should’ve been brought to trial for their actions a decade ago that caused the Great Recession. Further, articles during that period appeared almost daily that suggested big banks had abandoned small businesses and others. In many corners, the image of banks has yet to fully rebound.
In May, Bloombergreported that Bernie Sanders and Alexandria Ocasio-Cortez had joined to introduce a Loan Shark Prevention Act, accusing banks of acting like “modern-day loan sharks.” They called on Congress to enact a federal limit of 15 percent on credit cards.
Of course, this move is easy to portray as typical of two progressives. And there have been some well-reasoned counter arguments, including one in Bloomberg itself. Writer Noah Smith notes: “It’s not necessarily a bad idea, but there’s a better way to do it.”
That noted, even conservative Fox News host Tucker Carlson supports the act: “We think that’s a great idea. … On this one issue they are absolutely, indisputably right. … What the banks are doing is disgusting and it’s wrong.” Carlson even mentioned that Republicans once introduced a bill capping rates at 14 percent.
Meanwhile, Elizabeth Warren’s relatively strong presidential campaign has staked itself in large part on taking on the financial services industry. Earlier this month on the “Daily Show,” host Trevor Noah said, “She’s been fighting against the pedantry practices of banks and credit card companies before it was cool.”
Beating banks to the green scene: Leo DiCaprio’s Aspiration
Backed by a number of private equity firms and notably actor Leonardo DiCaprio, Aspiration describes itself as a socially conscious financial firm. Its motto is simple: “Go green … see your spending impact.” But there is nothing benign and tree-hugging about their strategy.
Aspiration directly attacks traditional banks for their high fees and lack of environmental concerns, stating that its “deposits are fossil fuel-free” and “will never go towards funding fossil fuel projects, firearms or political campaigns.” Its website lists Chase, Wells Fargo, Citibank, and Bank of America by name as “the four biggest global bankers of fossil fuels.” It also notes that 10 percent of Aspiration’s profits goes to charity, and incredibly tells customers: “Pay us a monthly fee you think is fair.”
Aspiration and similar companies also claim that many banks harm the larger world by their lack of social concern; profits take precedence over people. We have even heard comments from younger employees at traditional banks who express similar concerns.
Generating excitement with ‘Generation Green’
The pressure on banks stems in part from the race to become niche-oriented providers aimed largely at millenials and younger customers. And yet, a closer look demonstrates that people in these demographics are very concerned about causes such as the environment. In fact, the publication Environmental Journal calls millennials “Generation Green” and cites research that three in four are willing to pay extra for sustainable products. Does your bank support sustainability? If so, is the message getting out beyond the office water cooler?
Meanwhile, there is movement among some of the most respected experts in financial services to bring green issues to the fore. Chris Skinner, who writes The Finanser blog titled his May 31 column “Earth’s future is all down to the banks.” In it, he reveals that he has started a petition “to ask banks to stop funding, financing and banking fossil fuel firms.”
Putting it all together: Green means go
As an industry, banks have often done a poor job demonstrating just how essential they are to the economy and, bluntly, some have exploited consumers, underserved small businesses, and worked with large companies that offend socially aware consumers and investors.
Now is the time for banks to act. Bank managers and boards should conduct an internal review of potential green problem areas—and opportunities—and once identified, determine the appropriate action plan. Is it possible to go green and prosper? Absolutely.
Consider the concerns of a growing group of stakeholders. Now reframe it: Banks are always saying how “it’s all about the customer” and “we listen.” The banks that tune in to the growing green consciousness of consumers will be rewarded with loyalty: indeed, producing bottom-line green—and sustainability—of another kind.