Are my Bank’s Values My Own?
January 17th, 2018 by Bunch & Brock
While there are many considerations to take into account before choosing a bank or investing your money, there is one that is often overlooked by consumers: Where is the bank going to invest my money?
How Banks Make Money
Despite what many people think, your money isn’t stored in an empty vault waiting for you to take it out. Banks loan money for projects and to increase their own revenues. An article by Stephen D. Simpson on Investopedia puts it simply: “…banks basically make money by lending money at rates higher than the cost of the money they lend. More specifically, banks collect interest on loans and interest payments from the debt securities they own….” Some people might reconsider where they put their money, if they knew their bank’s investments went against their own values — for example, if their bank invested in fossil fuels or other projects and materials which they may find objectionable.
In a story from July, CNN addressed the question. They focused on the new book ”Real Impact: Economics of Social Change,” by impact investor Morgan Simon, and offered three solutions on how to be socially conscious about where your money is being put to use.
Socially Conscious Investing
The first suggestion is to consider looking beyond the bigger banks. There are thousands of smaller banks and credit unions beyond the larger names, and some offer differing accounts that specifically focus on projects and initiatives. Because they are smaller, they also offer more transparency, to allow you to know where the bank’s money is loaned or invested.
Simon, in his book, also suggests switching from a traditional savings account. As interest earnings are low at many more traditional banks, by instead investing in what Simon calls “social impact portfolios,” it’s possible to earn a higher percentage rate.
Finally, CNN suggests it is possible to invest ethically. It’s possible to check on financial tools such as mutual funds by going to web sites such as Social Index Fund or Select Environment and Alternative Energy Portfolio, looking up the company and seeing where it is investing your money.
Rating Individual Companies
There are also online tools and applications available to simply see if you are acting responsibly, according to your values, with everyday spending. The web site Swich is one such site. By simply searching a company’s name on Swich, a consumer finds a score for categories including dimensions of health, the environment, how the company treats its workers and the local and global impact of the company. While it may be used for banks, as well, Swich is not limited in its search, nor does it just list where investments go: it allows the consumer to make an ethical decision about whether to use a business, based on the business itself.
As it has with everything else, the internet has become a useful tool in helping people find out where their money goes. Only twenty years ago, finding the information about specific companies generally involved considerably more than a few clicks on a computer, or even a phone. And for those with ethical concerns, whatever they may be, it has now offered transparency about which banks and companies are more aligned with their values and has allowed them to spend accordingly.
Bunch & Brock, Attorneys at Law, takes great pride in serving our neighbors in Kentucky for more than 35 years. Working from offices in Lexington, we have the knowledge, experience and resources to help with all your legal needs. If you have legal questions or would like to set up an appointment, contact us online or call us today at 859.254.5522.