Socially responsible and ethical banks in the US: what to look for and what to avoid
Mighty Deposits Guide, 2023 Edition
When you put your money in a bank, the bank uses it to invest in all kinds of projects. If you’re someone who often thinks about the social and environmental impact of your personal choices, finding a bank that aligns with your values is one of the most important and impactful moves you can make. After all, we’re talking about harnessing the power of your entire bank account for good, not just a single decision at a store.
Though often the same handful of socially responsible, ethical, and/or ESG banks are suggested, there are thousands of banking options that may suit your needs and values (all of which are equally safe, with deposit insurance from the FDIC or NCUA).
What is socially responsible banking
Banks inherently have a significant social impact due to their unique position as the gatekeeper of capital: they decide which kinds of people and projects get funding. Whether we like it or not, the financial industry has a large role in shaping the trajectory of society. As noted in the Bank Holding Company Act of 1956, bank holding companies “possess a unique combination of financial and managerial resources making them particularly suited for a meaningful and substantial role in remedying our social ills.” Many banks recognize this role and put consideration for their impact on local communities at their core.
What to look out for
While there are many ways to think about social impact for banks, there’s one key aspect: how the bank chooses to lend or invest. Some banks like to draw attention to their employees' volunteer efforts or their sponsorship of community events. Other banks provide you an impact score based on your own debit card purchases at various stores. These are generally positive initiatives.
But for anyone serious about impact, it’s important to dig deeper beyond efforts like these, as they aren’t the most meaningful measurements of social responsibility. The highest standard of social responsibility occurs when a bank is conscientious about the social impact of the projects they finance.
Ethical bank and credit union options
Many organizations exist to highlight banks that are socially conscious throughout their entire business model, including lending and investment choices. Ultimately, there’s no single gold standard of social responsibility, since it can heavily depend on what you or your organization cares about. Start by reflecting on what you’d like your money to support — maybe that’s small businesses, or a Black-owned bank, or simply concentrated investment in your local community — and go from there. Below are some certifications to look for when comparing banks.
Community Development Financial Institution (CDFI) banks: CDFI banks are “mission-driven institutions that serve and empower economically distressed communities.” CDFI banks target the majority of their financing to low- and moderate-income communities and communities of color, so when you bank there you can know your money is providing capital to communities that need it most. This certification is given to banks by the US Department of the Treasury.
Low-income credit unions and CDFI credit unions: These are credit unions that primarily serve low- and moderate-income communities and communities of color. Credit unions receive these certifications from the US Department of the Treasury and the National Credit Union Administration.
Racially inclusive banks: Minority Depository Institutions (MDIs) are banks that are owned or led by Black, Native, Hispanic, and/or Asian Americans -- people who have historically been underserved by the banking industry. If the bank has at least 50% of voting stock owned by people of color, or the majority of board members are people of color and the bank primarily serves communities of color, then it can be certified as an MDI by the Federal Deposit Insurance Corporation. Each of these banks has its own lending strategy, so you can individually ask them about their social responsibility policies if you have questions. On the whole, these banks play an important role in increasing representation in the banking industry and providing economic mobility for communities of color. The full list of banks owned or led by people of color has more than 100 options.
Environmentally friendly banks and credit unions: This includes banks and credit unions that have sustainability certifications, such as B-Corps or members of the Global Alliance for Banking on Values (GABV), as well as financial institutions that don’t finance fossil fuels. We’ve put together a list of 30+ environmentally friendly banks and credit unions.
Other community-focused banks and credit unions: There are many other banking options that may align with your personal values. If you view social responsibility as your money staying local, or supporting small businesses and farms, for example, you may want to explore finding a community bank or credit union operating in communities that matter to you. If you find one you like, you can contact them to ask specific questions about their social responsibility policies. Many have impact reports ready to share.
Socially responsible banks you can get started with now
There are thousands of options in the lists linked above, so we suggest you check out the lists for the topics that most resonate with you and then filter for conveniences or locations. If you’re interested in banks that have chosen to be transparent about their impact and are open to being contacted by Mighty visitors, below some options.
National Cooperative Bank
Open an account online from anywhere in the US
Cooperatively-owned, member of the Global Alliance for Banking on Values, and one of the only banks in the US focused on financing cooperative businesses
This bank does not invest in fossil fuels and has been very active in financing renewable energy projects nationwide ($465.8 million in renewable energy since 2008)
Southern Bancorp
Open an account online from anywhere in the US
Certified CDFI, B-Corporation, and member of the Global Alliance for Banking on Values
This bank is focused on supporting underserved communities in the Arkansas and Mississippi Delta region and was recently featured as an anti-racist bank
Central Bank of Kansas City
Open an account online from anywhere in the US
Certified CDFI bank, one of few located in the Midwest
This bank is focused on investing in low-income communities, communities of color, and distressed neighborhoods in the Kansas City area
Carver Federal Savings Bank
Open an account online, accepting deposits from residents of NY, NJ, CT, MA, RI, MD, DE, VA, Philadelphia PA, and Washington D.C.
Certified CDFI bank and Black American-led Bank (Minority Depository Institution) and does not invest in fossil fuels
This bank, headquartered in Harlem, is the largest Black-American operated bank in the U.S. and focuses on revitalizing underserved neighborhoods
Ponce Bank
Certified CDFI bank and Hispanic American-led bank (Minority Depository Institution) and does not invest in fossil fuels
This bank, founded in the Bronx in 1960, provides banking to underserved communities throughout greater NYC
First Southwest Bank
Open an account online (only open to residents of Colorado)
One of just two certified CDFI banks operating in the state of Colorado
This bank has been serving rural communities in Colorado for over 100 years, and outperforms the industry in lending to small businesses and small farms
In Summary: Three Steps to Socially Responsible and Ethical Banking
1. Decide on your impact priorities and figure out if your current bank aligns with your values. To see what your bank is investing your money in, simply enter their name into the impact lookup tool. Some people who are passionate about supporting local economics choose to investigate how closely a bank is focused on serving communities ahead of Wall Street speculation. And though there’s no single way to answer whether a bank is ethical or unethical, some individuals choose to monitor banks’ history of unfair, deceptive, or abusive practices by looking them up on the Consumer Financial Protection Bureau database. (Want more data? Here’s a detailed guide to see where banks invest money.)
2. Identify a new bank. Use the resources above to find better banking options, like CDFI banks, low-income credit unions, Black-owned banks, locally-focused banks and credit unions, and environmentally friendly banking options. You don’t need to move all your money right away, or ever. You can start by opening a savings account just to try it, and then transfer additional money over time if interested. You can always work with multiple banks if that suits you.
3. Monitor your impact over time and reassess. Periodically, check up on your bank to see what they are investing in and which impact certifications they have. Speak up on social media if there are certain aspects of social responsibility you’d like to see from your bank. To get notified of the release of new quarterly data about how banks invest your money, subscribe here.
Bonus tips to maximize your impact:
Talk with others and share on social media about where you bank and why. This helps hold banks accountable and reminds others that where we bank matters.
Introduce intentional and socially conscious banking to your workplace or any organizations you belong to. To get started, check out the guide to banking for impact for corporations, non-profits, and other organizations.
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