Today’s Solutions: January 29, 2023

As it turns out you can run a successful bank, while maintaining a moral conscience. The 2008 financial crisis left many of us skeptical about the ethics that drive financial decisions made around the world. The idea that you must sacrifice morality in order to make more money is nonsense, as pointed out in a new report from the Global Alliance for Banking on Values (GABV), an organization made up of financial institutions that focus on sustainability.

There are 25 GABV compliant banks around the world that hold more than $70 billion in assets. And as the Real Economy—Real Returns report by GABV explains those companies often post higher returns than traditional banks that focus on dollars and cents instead of overall social impact.

GABV compliant banks all adhere to the same criteria:

  • A commitment to social banking, and the triple bottom line—people, planet, and profit, in that order
  • Maintain a minimum balance sheet of $50 million
  • Be an independent and licensed financial institution that provides consumer retail banking

The main findings of the Real Economy—Real Returns report are two-fold. First sustainably focused banks lend more to businesses; make more from the loans, yielding higher returns. This makes sense because sustainable business models are more secure. They look toward the future and analyze the ramifications of the sum of their actions, instead purely monetary gains.

Secondly, sustainable banks are more immune to volatile markets. Traditional banks have lower returns and lend less than GABV banks. This means they have need more leverage in the business deal they make, which ties them closer to unpredictable markets. Returns on assets and equity were both lower for GABV banks until the 2008 financial crisis, now GABV banks post higher returns in both regards.

The ‘Too Big To Fail’ banks are what their name implies, and have been sewn into the lifeblood of our global economy. But, as often the case, the biggest aren’t necessarily the best and better options are available. There are banks out there that share your vision of a green future and care about you, the planet, and the implications of their business.

Go to gabv.org to find out more and trustworthy banks.

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