1.22.2018

Divesting from Fossil Fuels, Part 1: Personal Banking

1 comment:
 
[Nick Depsky, ERG graduate student]


Do you feel powerless in the face of climate change? Do you have money in a major bank? Do you own any stocks? What about that retirement account you forgot about from a previous employer? Are you confused by the massive, opaque financial world but acknowledge the need to save for boba tea and multiple pairs of socks? Maybe you want to know how your money can be used to take a tiny bit of power away from the fossil fuel industry and reinvested in better alternatives.

If you answered “YES” to any of the above questions, I encourage you to read this post. You may become inspired, as I have, to personally divest from fossil fuels and reinvest in better alternatives.

Why Divest?


It’s true that the most impactful acts of divestment would be from large institutions and corporations, rather than from starving grad students paying a million dollars a month for a leaky little apartment room in the Bay Area. But this doesn’t mean that you can’t still wield what money you have to cast a real financial vote of indignation against the fossil fuel industry, symbolic though it may feel.

Maybe you’ve had the same thought that I’ve had in the past: “I don’t have enough money to make any kind of a difference to Chase Bank or Wells Fargo.” But I think it helps to think of your money as a form of voting. Those of us who are compelled to vote for people and policies we support should be equally compelled to align our financial assets with those ideals, regardless of how insignificant a single vote may feel in a culture that under-values voting.

Collective divestment really can make a difference. The campaign to divest from South Africa in the 80s contributed to dismantling formal apartheid, and we are starting to see a similar swell organize around fossil fuels. Besides taking money out of the hands of industry players whose actions we oppose, divestment also erodes the political and social capital upon which these industries rely to lobby and continue operating.

Major Banks


Beyond being complicit in long-standing predatory lending and discriminatory lending practices, major banks and financial institutions have also invested billions in fossil fuel industries, financing tar sands, pipelines, and arctic and deep-water drilling.  JP Morgan Chase (Chase Bank) sinks roughly seven billion dollars a year into such endeavors, with Bank of America and Citibank each investing between four and five billion annually.  Wells Fargo’s annual investments come in around one to two billion dollars.  The full rankings of banks’ contributions to fossil fuels by industry type can be seen via this tool maintained by the Rainforest Action Network.

Total financing of fossil fuels by year (source: Rainforest Action Network)

Previously, I had my entire savings in Wells Fargo, and while they contribute comparatively smaller amounts to fossil fuels than some other banks, they have also shown a tendency to disregard the law in terms of both predatory lending and opening of fraudulent accounts in the years following the 2008 crash, a practice for which they were eventually fined $185 million last year (a whopping 0.2% of their 2016 revenue).

Alternatives to Major Banks


Credit Unions:
Switching over to a credit union is a good bet, since they are not-for-profit institutions by their nature.  However, some credit unions are intertwined with large banks and the fossil fuel industry in obvious ways, and in some ways that I still don’t totally understand. Credit unions are not all equal. Make sure their practices align with your values. Generally speaking, going with a local credit union that is community-focused is a solid choice, though it might still be worth chatting with a representative about what varieties of loans they issue.  Here are some local credit unions I’ve been recommended:


This list is non-exhaustive and there are many more.  All of the institutions above are equal housing opportunity lenders. 

Values-Oriented Banks:
I switched over to a mission-oriented bank rather than a credit union. I like the fact that they are an example of a successful triple bottom line banking institution (B-corps certified) that actively funds a wide array of socially-conscious sectors.  I found two candidates in the Bay Area and chatted with representatives from each to find out more information.  Here’s what I learned:


Beneficial State Bank New Resource Bank
0% fossil fuel investment
Branches California, Pacific Northwest
Closest: Downtown Oakland
San Francisco only
Non-profit foundation All profits dispersed in forms of grants or loans to communities All profits dispersed in forms of grants or loans to communities
Housing lending Directly lends to affordable multi-family housing No direct housing lending, but invests in construction of affordable units
ATM Networks MoneyPass (US Bank, Mechanics Bank, Atlantic Credit Union) & All Point Network (inside big retailers like Walgreens, CVS) STAR & MoneyPass 
Credit cards In-house Visa credit cards starting 2018
Currently partners with various non-profits (i.e. Sierra Club) to offer cards to clients
Does not offer credit cards, but partners with a credit-union credit card agency 
Targeted lending sectors Affordable Housing
Multi-Family
Sustainable Food and Agriculture
Green Energy
Rural Communities
Minority-Owned Businesses
Sustainable Business
Green Real Estate
Nonprofits
Organic & Natural Products
Clean Energy




Interest Rates


I looked into interest rates on savings and checking accounts for Beneficial State Bank and New Resource Bank, and compared them to Wells Fargo.  Beneficial seems to have the best interest rates for small accounts out of all three; Wells Fargo comes in last.  Beneficial also had the lowest minimum ($1,000) requirement to open a certificate deposit (CD) account, compared to $2,500 for Wells Fargo and $25,000 for New Resource.

Here is a snapshot from an investment infographic from New Resource Bank:


New Resource’s index of “Real Economy Assets”  illustrates their departure from the policies of big banks that typically have their money tied up in the financial economy instead of community investments. Beneficial State Bank has a similar “Real Economy Assets” figure of roughly 80%.



In the end, I decided to go with Beneficial because of geographic advantages.  Their nearest office is in Oakland rather than San Francisco. And they have locations in Los Angeles, so I can tell my friends down there to switch over.  Both New Resource and Beneficial seem like great options, and I would encourage you to get in touch with them yourself if you’re thinking of switching.


Stay tuned for the next installment of this three-part series, where Nick looks at retirement accounts mutual funds. 

1 comment:

 
© ERG. Design adapted from Main-Blogger Blogger Template.