Addressing climate change requires action on many aspects of our lives — shopping, eating, working, and even our bank accounts. One often overlooked but impactful step is switching to a climate-friendly banking option.
Amidst using less plastic, reducing your food waste, and shopping consciously, your decision on where you keep your money may seem completely irrelevant. It did to me…until I learned more about the stock market and how financial institutions were actually using the money we have in our accounts.
Many big banks continue to fund the fossil fuel industry utilizing your money, despite the urgent need to transition to a greener economy. Climate-friendly banks, however, invest in a range of projects and industries that can have a positive impact on the environment, such as renewable energy, sustainable agriculture, and green technology. But these banks still have everything you look for in a bank like personal loans or real-estate loans; the stand-out feature being that they don’t invest in the fossil fuel industry. By supporting these initiatives with a “green bank,” you take an even more active role in building a more sustainable future for all of us.
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Why an Eco-Friendly Bank Matters
Your choice of bank can have a significant impact on the environment. For a large portion of my adult life, I thought the money in my bank account was in its own little safe at the bank. When I got a direct deposit from work, someone literally walked the money over to my safe/account and deposited it. And when I pulled the money from an ATM for some reason, that ATM had a direct link to my little safe with my money in it.
Don’t ask me why…I just really never put any thought into it, even though I’ve seen It’s a Wonderful Life several times a year for the past 25+ years.
“You’re thinking of this place all wrong, as if I had the money back in a safe. The money’s not here. Well, your money’s in Joe’s house. That’s right next to yours. And then the Kennedy house and Mrs. Macklin’s house and a hundred others. You’re lending them the money to build and then they’re going to pay it back to you as best they can.”
George Bailey, It’s a Wonderful Life
And that, in a nutshell, is how banks and other financial institutions use your money. To fund other loans and investments they have. Once I grasped this concept, I switched my money over to a climate-friendly banking alternative at Aspiration1.
Big Banks Invest in Fossil Fuels
When you deposit your money in a bank, it’s important to know where your money is going; what kind of projects or companies is your money being loaned out to or used to invest in. Many big banks invest in fossil fuel companies and projects, to the tune of $705 BILLION in 2023. Those investments are funding projects like mining, drilling, fracking, and even some of these fossil fuel companies’ expansion plans.
Fossil fuels, namely coal, oil, and natural gas, are energy sources formed from the remains of ancient plants and animals over millions of years. They are formed into coal, oil, or gas due to sustained exposure to high pressure, heat, and geologic processes throughout the years.
While they have powered much of our modern world with things like heating, electricity, and transportation, their extraction and use has significant environmental costs. When burned, fossil fuels release carbon dioxide and other greenhouse gases, which contribute to global warming and climate change. The combustion of these fuels also produces air pollutants that can harm human health and degrade ecosystems. The process of extracting fossil fuels can cause habitat destruction, water contamination, and other additional environmental damage.
The Role of Financial Institutions in Climate Change
On the flip side, climate-friendly banks provide loans and buy stock into clean energy, like wind and solar power. Some of these banks and credit unions even pledge that your money will not be utilized to fund fossil fuels; this provides transparency and is great assurance to consumers looking to ensure their funds are utilized in accordance with their values.
Sustainable banking options might also offer other programs like reforestation, carbon offsetting, and other initiatives that reduce carbon emissions (either yours or their own) and help fight climate change, instead of causing climate chaos. Part of the reason I chose to switch to a Spend & Save account at Aspiration was their Plant Your Change2 initiative, which rounds up your purchases and funds planting trees and restoring forests to help mitigate climate change (and the cool-looking recycled ocean-plastic debit card I would receive).
The Impact of Climate-Friendly Banking
Switching to a climate-friendly bank seems like a simple choice, but it can have a significant impact on reducing your carbon footprint as an individual. Making the choice to use a bank that invests in sustainable and renewable energy projects is an active contribution on your part towards a cleaner and greener future.
Environmentally Friendly Banks Reduce your Footprint
With the switch to a climate-friendly bank, you are choosing to support a financial institution that is committed to reducing its carbon footprint. Instead of investing in destructive fossil fuels, buying stocks of energy companies, or buying up mortgages to place outrages rents in places, these banks typically invest in renewable energy projects. With these investments, they help to reduce greenhouse gas emissions and promote a cleaner environment.
In addition to reducing your carbon footprint, ethical banking also allows you to align your financial decisions with your values. You can feel good knowing that your money is not supporting companies or projects that harm the planet and that it is instead being used for combating climate change.
Socially Responsible Banks for a Brighter Future
The investment portfolio and focused projects of climate-friendly banks tend to lean toward supporting renewable energy. These projects include wind, solar, and hydroelectric power, among others. By channeling funds into these initiatives, these banks contribute to a cleaner environment by reducing reliance on fossil fuels.
Investing in renewable energy projects has economic benefits as well. It creates jobs in the renewable energy sector, fostering innovation and skill development in emerging technologies. These projects help stimulate local economies, especially in regions where traditional industries may be declining, by providing long-term employment opportunities.
The shift toward renewable energy can lead to energy independence for communities, reducing vulnerability to volatile fossil fuel markets and enhancing energy security. Our whole home solar and battery backup system gives us a big sense of security when we hear about unpredictable weather or rolling blackouts.
In addition to supporting large-scale renewable projects, socially responsible banks often engage with smaller, community-based initiatives such as energy efficiency programs, green building developments, and local agriculture. This comprehensive approach ensures that their assets and holdings create a broad and lasting positive impact on both the environment and society.
How to Choose a Climate-Friendly Bank
When looking for a bank aligned with your values (like I did when I switched over to Aspiration), there are a few key factors to consider before making the leap. Trust me, I know it’s not easy. You’re not just changing your bank, you’re getting a new debit card, checking/savings account number, and all of your payment information needs updated everywhere. So, if I get a bank, I’m sticking with it as long as possible.
With any bank in today’s world (or any company really), things are constantly changing and you need a bank that is going to keep up with the ever-changing climate, but do it in a way that doesn’t effect you. You need that trust and transparency. Over the years I’ve banked with them, Aspiration has made some changes that…I wasn’t initially a big fan off. As it turns out though, they were changes that didn’t even impact me, and I’m sure this was the case for a lot of their customers, which is why they made the changes they did.
Transparency and Reporting Standards
One of the most important factors to consider when choosing a new planet-focused bank is transparency. When you’re doing your research, you’ll want to look for banks that are transparent about where their money is being used and lending practices as well as ones that report on their environmental impact. This can include information on their carbon footprint, as well as their investments in renewable energy and other eco-friendly projects.
Certifications and Climate Commitments
Another way to identify an eco-friendly bank is by looking for certifications and climate commitments. Some banks have received B Corp certification, which means they meet rigorous standards for social and environmental performance, accountability, and transparency. Others may have received Fossil-Free Certification, which means they do not invest in fossil fuels.
Offsetting their carbon emission, or even Climate Neutral Certification, would be a additional climate commitment you could look for in your research. I was really impressed with my bank, Aspiration, when it became the first financial institution to be Climate Neutral Certified, as of 2024. This means they have committed to a net-zero future by offsetting any greenhouse gases they produce, and are currently carbon neutral. This commitment often involves investing in renewable energy projects, improving energy efficiency, and purchasing carbon credits to balance out their carbon footprint.
Another commitment to look for is if the bank is a member of 1% for the Planet, a global movement where companies pledge to donate 1% of their annual sales to environmental causes. By aligning with this initiative, these banks contribute directly to the preservation and restoration of the environment, making a tangible impact beyond their day-to-day operations. These certifications and commitments signal a bank’s dedication to sustainability and provide customers with a trustworthy guide to choosing a financial institution that aligns with their environmental values.
Climate-Friendly Green Banking Initiatives
Many environmentally conscious banks are also introducing creative programs that empower customers to make a positive environmental impact through their everyday banking activities. For instance, “Plant Your Change” programs like the one through Aspiration, allow customers to round up their purchases to the nearest dollar, with the extra amount going towards tree planting or other environmental projects. Similarly, carbon offset programs let customers offset the carbon footprint of their purchases by supporting initiatives like reforestation or renewable energy development. These programs make it easy for individuals to contribute to environmental causes with minimal effort.
Beyond individual actions, banks are also taking steps to ensure their overall operations align with sustainability goals. Environmental impact assessments are increasingly being used by banks to evaluate how their lending and investment practices affect the environment. These assessments guide the banks in making more sustainable decisions, helping to steer capital towards low-carbon projects and industries.
Some banks are creating green marketplaces that connect customers with eco-friendly products and services, promoting sustainable consumer choices, and fostering a more circular economy. Aspiration just recently created their Green Marketplace3 a marketplace with vetted brands that do good for the climate, and I can received cash back simply by using my debit card to purchase items from sustainable merchants I was already going to purchase from.
Steps to Switch to a Sustainable Bank
Once you’ve done the research and decided to switch to banking services that stand for the same values you do, here are some steps you can take to make the transition:
Transitioning Your Finances Responsibly
You’ll start by opening a checking or savings account with the new institution. In today’s world of online banking, this is a quick money transfer from your current bank. In some cases this might take a couple of days to “clear” and be available within your new bank.
Now you’ll want to think about your direct deposits. This is one of the hardest things to do in the entire process. I don’t know about you, but my payments for bills don’t fall nicely into my pay periods. So…it’s not like I can just move my direct deposits immediately to the new bank, it has to be slightly strategic around your larger bills like your mortgage.
Once you are automatically funding your new account, you’ll start the process of transferring any automatic payments or direct deposits to your new account to ensure a smooth transition. Then, slowly updating your payment cards on bills that might not be automatically paid.
As a last thought, if you have any outstanding loans or credit cards with your old bank, you might consider transferring those as well. Many climate-friendly institutions offer clean energy loans or credit cards that can help you reduce your carbon footprint while still meeting your financial needs.
Broader Climate-Friendly Financial Practices
If you’re committed to taking action on climate change, switching to a fossil-fuel free bank is a great first step. But there are also other financial practices you can adopt to further reduce your carbon footprint and support the transition to a greener economy.
Investment and Pension Funds with a Climate Focus
Investment and pension funds are an important way to channel money towards climate-friendly projects and businesses. Look for funds that have a specific climate focus, such as renewable energy, energy efficiency, or sustainable agriculture. Many such funds exclude companies involved in fossil fuels or other environmentally damaging activities.
Some mutual funds also offer fossil-free investment options, which can be a good choice if you want to divest from fossil fuels but don’t have the time or expertise to manage your own portfolio. You can look for sustainable funds, ESG funds, or ask your financial adviser what your options are.
Supporting Businesses Committed to Climate Action
Another way to support climate action is to direct your money through conscious consumerism towards businesses and charities that are committed to reducing their carbon footprint and promoting sustainability.
When choosing where to direct your money through sustainably minded business, look for organizations with a clear commitment to climate action, transparency, and a track record of success. Certifications are good to see as well (B-Corp, Fairtrade, etc.). You can also use tools like Aspiration’s Green Marketplace to look for transparent and climate conscious brands. There’s bonus cash back if you’re an Aspiration account holder!
Final Thoughts on Climate-Friendly Banking
When considering whether a bank or credit union aligns with your values, reviewing a list of banks that are committed to eco-friendly practices can be beneficial; Bank.Green is a great first step of in your research for a sustainably minded bank. This was not an available tool when I switched my banking services (many years ago, following a break-up), but it has a great listing of eco-friendly banking options.
As more eco banks gain traction, individuals can choose to open an account at a bank that prioritizes a climate positive future, and feel really good knowing that their money is working with their everyday actions for a better future.
Ultimately, whether you select a cooperative bank or a traditional savings bank, the choice to bank with institutions that focus on sustainability can lead to a more responsible financial future. Several banks in the U.S. are now recognized as Bank for Good banks, making it easier for consumers to align their financial goals with their environmental values. By choosing wisely, customers can help fund climate solutions and support the broader movement for sustainable banking.
1The Aspiration Spend & Save accounts are checking and savings accounts offered through Coastal Community Bank, Member FDIC. Approved deposit accounts are FDIC insured up to $250,000 per depositor. For balances greater than $250,000, Coastal will Sweep the excess funds to one or more FDIC-insured depository institutions in their Sweep network (each a “Bank”) up to $250,000 per Bank. With five Banks available through the Coastal Community Bank Insured Bank Deposit Program, Deposits are FDIC-insured up to $1.25 million per depositor. This amount is subject to change at any time. Visit fdic.gov.
The Aspiration Mastercard® Debit Card is issued by Coastal Community Bank, Member FDIC, pursuant to licensing by Mastercard® International Incorporated. Aspiration is under separate ownership from any other named entity. Aspiration is not a bank.
2When you choose to add to your Aspiration Debit Card to the Plant Your Change Service, we round up the amount of Aspiration Debit Card transactions made using your Aspiration Debit Card feature in your Aspiration Spend Account to the next whole dollar amount (from $0.01 to $0.99), and transfer the amount in excess of the purchase price to an Aspiration Plant Your Change Service Account. Even dollar transactions ($xx.00) are not considered qualifying transactions and are not eligible to be rounded up for this Service. The Plant Your Change Service Fee from Debit Card transactions will be deducted from your account once each business day and include all qualified transactions incurred since the last fee withdrawal. Funded trees can take up to 18 months to plant, allowing for time to set up nurseries, select/expand planting sites, take advantage of optimal planting seasons and accommodate for local/regional/country social, political and health considerations. Planting trees and restoring forests are among the best ways to draw down carbon from the atmosphere, because they can help mitigate the impacts of climate change and contribute to healthy ecosystems that support wildlife and people. Trees planted by our reforestation partners are not intended to be used as carbon offsets and are not verified as such by a third party. Planted trees are part of a reforestation program where approximately 20-30% more trees are planted to account for natural survival rates and unforeseen circumstances (i.e., wildfires, natural disasters, disease) so enough trees survive to reforest an area. However, there is no guarantee all trees planted will be permanent.
3Aspiration’s Cash Back program is subject to change at any time and without notice, including reversal of rewards for abuse, fraud, and other illicit activity. Cash Back rewards are generally credited on the first day of each calendar month. For additional Cash Back details, click cashback on purchases.
