Breath of Clarity

Social/Ethical Banking Discussion Comment

Original Post by Ben Short:

A research paper by Eyraud, Wang, Zhang, and Clemens looks into green investments, what it is and who is doing it. They define green investments as, “the investment necessary to reduce greenhouse gas and air pollutant emissions, without significantly reducing the production and consumption of non-energy goods.” (2011, 5). Additionally, green investments refer to both private and public sectors. Some ways that this financial service is going green is by investing in technology and practices that are reducing pollution, reducing energy consumption, as well as technologies that work to sequester carbon in relation to agriculture and deforestation (Eyraud, Wang, Zhang, Clemens 2011, 5).

Social banking refers to the ways in which the banks are repurposing (often in the form of lending or investments) money deposited from consumers. Often times, financial institutions are making conscious decisions that are benefitting society at the environmental or social level (Growensemble 2020). One way Financial institutions achieve social banking is through becoming “B-Corp” certified, which is where companies are, “are legally required to consider the impact of their decisions on their workers, customers, suppliers, community, and the environment,” (Grownensemble 2020).

Aspiration, an online-only green banking system, is a great example of an ethical banking service. The bank is a certified B-corp bank, and focuses on reducing its customers carbon footprint through its carbon offset program (Thegoodtrade 2020). When the customer purchases fuel at a gas station for their car, they are able to use Aspiration’s “Conscious Coalition” to purchase from companies that help reduce emissions in their practices, such as TOMs. In addition to the carbon offset program, the online institution also refuses to invest in fossil fuels, and customers have the option to have a tree planted with every purchase (Thegoodttrade 2020).


Burgess-Marshall, H. 2020. “Socially Responsible Banks: Who You Should (and Shouldn’t) Bank with!” Growensemble. to an external site.

Eyraud, Luc & Wane, Abdoul & Zhang, Changchang & Clements, Benedict. 2011. “Who’s Going Green and Why?” Trends and Determinants of Green Investment. IMF Working Papers. doi 10.5089/9781463927301.001.

The Good Trade. 2020. “7 B Corp Certified Green Banks (So You Can Match Your Money With Your Values)”

My Comment:

I am intrigued by institutions who are B-Corp Certified because your post mentions there is a legal component to their commitment. In short, author Tyler Hamilton describes B-Corp standards (Links to an external site.) as “rigorous” (Hamilton 2013). The author depicts the analogy: the B-Corp certification is to sustainable business as the Fair Trade certification is to coffee.

The current certification requirements (Links to an external site.) are explicitly listed on the B-Corp website (Links to an external site.). Corporations have to renew their memberships every three years. Does the monitoring schematic need to be stricter? How does the fact a company needs to pay to be a member contribute to the legitimacy of a B-Corp certification? Moreover, there are now over 3400 companies spanning across 74 countries. Can a social/ethical bank grounded in resourcing small to medium sized, local companies trust the B-Corp certification as enough criteria to provide a loan? If not, what type of additional review would need to be done?

I was surprised to see B-Corp members include companies with less than one year of operations, companies that are publicly-traded or have between $100 million and 4.9 billion U.S. dollars in annual revenue, parent companies that have over $5 billion U.S. dollars in annual revenue, subsidiaries, franchises and other affiliated entities. Currently, social/ethical banks are less inclusive. However, as social/ethical banking grows, do the banks need to find a way to expand its lending scope to companies which are both sizable and responsible?

Similarly, how can social/ethical banks monitor the social efficiency of the projects they finance?

Comment by Danette Bordenkircher:

I used to work with Fair Trade and B Corps certified companies so I was intrigued by some of your questions about B-Corp. As far as certifications go, B-Corps is the most strict and thorough in its certification process. The certification evaluates everything from supply chain to treatment of workers and also has a legal requirement that holds companies accountable. A company needs to go through the certification process every three years, but during that time they are expected to be working towards improvements. B-corps also updates their assessment of companies every 3 years to ensure improvements are being made. Between certifications, B-Corps conducts annual reviews that are done randomly. Since transparency is also a requirement of the certification, I looked through some B-Corps impact reports and think that it does provide enough criteria to provide a loan. (B Corporation 2020)

I agree that certification fees can make certifications inaccessible, especially for small businesses. That has also been an issue with other certification processes including Fair Trade and Organic. However, B-Corps does base their fee on an organization’s annual sales and gives discounts to companies with at least 50% ownership from underrepresented backgrounds. (B Corporation 2020)

Comment by Ben Short:

Mary – great questions and thank you, Danette for shedding some light. I think that it is great that B-Corps gives discounts to companies with 50% ownership from underrepresented backgrounds.

In response to Mary’s question about how social and ethical banks ensure that the companies/projects they are financing are doing what they promise, I think that is a crucial point that these banks need to focus on. One way to achieve this is through required transparency (in the form of reporting etc..). On the other side, part of what makes ethical banking what it is, has to do with their focus on transparency so that customers are confident that their money is being invested into industries that aren’t, for example, destroying our climate. Achieving a two way relationship focused on transparency would benefit both parties in the long run.

My Comment:

I attest to the fact it’s awesome B-Corps gives discounts to companies with 50% ownership from underrepresented backgrounds. It’s good to see B-Corps putting money into their values. I also agree with the need for transparency from both sides. I imagine that is part of how social/ethical banks function well in that they end up partnering with companies that are willing to be transparent.