U.S. Sustainable Banks-Alternative for Investors
Environmental, Social Concerns Are Major Part of Banks' Mission
The attention of the media and financial watchdogs has lately been on banks and other lenders accused of engaging in reckless, predatory practices that helped trigger the current worldwide economic crisis. Little attention has been paid to the quiet growth of sustainable banks around the world; even less noticed is the slow penetration of the concept of sustainability in the U.S. banking industry.
Armed with sufficient research and a clear investment plan, individuals who are socially and environmentally conscious may find that this is the ideal time to invest in this type of institution.
Sustainability and the Triple Bottom Line
The terms "sustainable" and "sustainability" have become staples in the business lexicon. While there is no single definition, many experts attribute an environmental aspect to the terms. Under this view, a company or institution is "sustainable" if it operates in an environmentally responsible manner and its products, services, and business practices have little or no negative impact on the environment. Some of the touted benefits of sustainable business are lower operating costs, improved brand image, and reduced risk.
A related and growing trend in the business world is a focus on the triple bottom line. In simple terms, this means that a business determines its sustainability- and success- in terms of the financial, social, and environmental effects of its policies, actions, and practices.
Sustainable banks with a triple-bottom-line focus have existed for several decades, particularly in Europe and in developing nations. In fact, in June 2009, Triodos Bank, which originated in the Netherlands in 1980, won the fourth annual Financial Times Sustainable Bank of the Year Award. Moreover, on September 25, 2009, the newly-formed Global Alliance for Banking on Values announced at the Clinton Global Initiative in New York City that it will help expand to $2 billion the amount available in loans to green projects and poorly served communities worldwide. The Global Alliance is a network of 11 leading sustainable banks.
ShoreBank Corp. and e3bank
One member of the Global Alliance is ShoreBank, a sustainable, triple-bottom-line bank chartered in Illinois. Founded in 1973 and part of ShoreBank Corporation, ShoreBank in 2000 incorporated environmental issues in its mission of serving communities ignored by other banks.
A sister bank, ShoreBank Pacific, chartered in Washington and formed in 1997, serves the Pacific Northwest. It claims on its Web site to be the first commercial U.S. bank to committed to environmentally sustainable community development. It also claims to be the only financial institution with a science staff that assists businesses in identifying sustainable practices. Among other things, the bank helps its borrowers find ways to be more energy efficient and improve their material use and by-product recycling.
Set to launch in 2010 in the Philadelphia area, e3 bank seeks to distinguish itself from other banks by embracing social responsibility as a guiding principle. As explained by e3bank chairman Sandy Wiggins in an April 2009 telephone interview with this reporter, "We are raising our equity right now focused on developing new business models with paradigms, such as the triple bottom line, that are forward-thinking and which recognize that, as business people, we can no longer afford to operate as before." In other words, "with every business decision that we make, we must take into account the impact on the environment and social equity," Wiggins said.
Wiggins believes that there are many opportunities for investing in emerging businesses that adhere to the triple-bottom-line paradigm. "It takes some work to identify good ones, but it is not only good for the environment, it is probably the strongest growth market," he stated. "If our country is to recover from this economic downturn, that [triple-bottom-line focus] is where it is going," Wiggins suggested.
Investing in Sustainable Banks Now
Triple bottom line is a relatively new concept in the U.S. banking industry. However, if ShoreBank Corp. and e3bank prove to be successful business models, other banks are sure to follow suit. This will put today's prescient investors in that kind of business way ahead of the pack.
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