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If you've become more aware of how your financial decisions impact the world at large, you may no longer want to choose your bank products or companies solely due to price or appearance. Increasingly, bank customers are selecting where they do business based on how well the bank's values align with their own. One way to do this is to switch to a bank that practices social responsibility.
To choose a socially responsible bank, start by deciding what values you want your bank to reflect, since "socially responsible" can mean different things. Then you'll need to do some research to ensure you choose a bank that actually walks the walk.
What Is a Socially Responsible Bank?
You may know about ESG investing, a movement that emphasizes putting money in companies that support the environment, social issues and corporate governance. This has extended into the broader world of ethical finance, including socially responsible banking with deposit accounts.
A socially responsible bank is a financial institution that makes decisions not just on profits, but on making a positive impact in the world. It looks not just at what the companies do publicly, but corporate practices, how they treat their employees, how they invest, and what legislation and politicians they do and don't support with lobbying or political contributions.
There are different ways to define socially responsible. It might include banks that:
- Don't invest in fossil fuels and other practices contributing to climate change
- Invest in renewable energy
- Don't invest in or work with certain companies or industries you oppose
- Don't participate in exploitative labor practices
- Support social justice causes such as LGBTQ+ or racial justice
- Focus on serving low-income populations, people of color and other groups traditionally underserved by banks
- Donate a portion of profits
Some socially responsible banks focus on one issue, such as being environmentally friendly, while others support multiple causes. As you're choosing a bank, consider which issues or practices align most with your values to more easily pinpoint a match.
Pros and Cons of Socially Responsible Bank Accounts
Before moving your money, familiarize yourself with these benefits and drawbacks of socially responsible banking:
Pros
- Aligns with your values: If you're passionate about the environment, you probably already make efforts to spend money sustainably. Using a socially responsible bank that doesn't invest in fossil fuels or has other environmentally friendly practices is another way to ensure your money aligns with your values.
- Can make a positive impact: You'll know you're actually helping make the world a better place.
Cons
- Requires more research: There isn't a single source for all of the information you need to find and select a bank in this space, especially since socially responsible banking means different things to different people and businesses.
- Relying on smaller banks: Many of the nation's big banks don't practice socially responsible banking, or at least not to the extent that a small, cause-focused bank might. If you want to use a bank that prioritizes social responsibility, you may wind up choosing a smaller bank. The downside: Smaller banks often have fewer locations, financial products and digital services.
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How to Choose a Socially Responsible Bank
Ready to switch to a bank that does good? These steps will make it simpler to find the right bank and make the move.
1. Find a Bank
Finding a socially responsible bank can take a good amount of research and vetting to ensure you're choosing the right bank for you. Here are a few ways to find one:
- Look to the experts. If you're passionate about LGBTQ+ rights, for instance, you may start by looking at which institutions are trusted within the LGBTQ+ community. For example, every year, Human Rights Campaign—one of the nation's biggest LGBTQ+ advocacy organizations—releases their corporate equality index. They review major companies based on factors such as inclusive policies for LGBTQ+ employees and corporate social responsibility efforts affecting the community. You can review a list like that to see which financial institutions rank highly according to experts aligned with your values.
- Find a pre-vetted list. Some third-party organizations have already researched and shared lists of banks they've found to be socially responsible in key areas. One example is Bank for Good, a coalition that developed criteria for banks that fight, rather than contribute to, climate change. After making requirements, they vetted 100 financial institutions for factors like commitment to the climate and underserved populations.
- Look for certifications. Some socially responsible banks choose to obtain certifications for additional legitimacy. One certification you can look for is B-corporations; this designation requires businesses to meet strict standards on transparency, corporate governance and social and environmental impact. Another is Global Alliance for Banking on Values, a network of independent banks that focus on social, economic and environmental impact. If people are your focus, look for banks certified as Community Development Financial Institutions, which support finances in underserved and distressed communities.
- Seek out details. Corporations can be skilled at using buzzy language to attract consumers without substance behind them. For example, a company that makes money selling Pride shirts but spends lobbying dollars on politicians that actively fight against LGBTQ+ rights (pinkwashing). If a company says they're green or environmentally friendly, don't just take their word on it. Scour their website and social media accounts and political contributions to see what they're actually doing to follow through.
2. Make the Switch
Switching banks can be a headache, but it's easier when you have a plan. To start, you'll open an account at your new bank of choice and transfer a minimum amount to fund it. Then you'll need to update all of your automatic payments, direct deposits and linked accounts to this new account. You might want to pause first and look at your current account to make a list of all of the places where you'll need to change your info.
If possible, keep your old account active for at least a month so you have time to catch any automatic payments or bills you missed. All in all, the process of switching banks can take a few minutes or it may take a few weeks.
3. Explore Other Options
Once you're set up with a socially responsible bank for your checking and savings accounts, your efforts don't have to end there. You can also find socially responsible retirement accounts and general investment accounts.
Expand Your Search to Credit Cards
Many financial institutions also offer credit cards, so beyond checking and savings, that's another realm where you can practice socially responsible banking. But it's hard to compare options when viewing bank websites individually.
With Experian CreditMatch™, you'll receive personalized credit offers from a variety of banks based on your FICO® Score☉ . If you do the research on socially responsible banks in advance, once you get your list of matched card offers from Experian, you'll already know if any of these are with banks that align with your values.