How to bank, save and invest in a socially responsible way
NEW YORK — You work hard to be socially conscious. But what about your money?
For all the cruelty-free, anti-sweatshop, organic attention you give your individual purchases day to day, your money may be paying for causes you don’t want to support.
“Do you know where your money spends the night?” asks Morgan Simon, an impact investor and author of the forthcoming book, “Real Impact: The New Economics of Social Change.”
“We’re stakeholders of banks and institutions and they are investing money on our behalf. We should know where it’s going.”
She says asking questions like: Who owns this bank? How are my deposits being invested? are key to knowing what your money gets up to when you bank, save and invest it.
“Every day Americans spend $36 billion as consumers,” says Andrei Cherny, the co-founder and CEO of Aspiration, a financial firm emphasizing social impact. “That is an enormously powerful lever to change the way companies act toward the environment and people.”
Here are three ways to do an impact check on your money and ensure your financial institutions and investments are aligned with your personal values.
Should you break up with your bank?
“When you put your money in the bank, it isn’t just sitting in the back of the vault,” says Cherny. “It’s is being loaned out, and for many big banks that means they are lending the money in a way that is dangerous for the planet.”
Sure, you’ve heard of the big banks. But all across the country there are other banks and credit unions that you may find are more aligned with your values.
For example, there’s San Francisco-based New Resource Bank, which serves values-driven businesses and nonprofits. There’s Aspiration’s Summit bank account. Or Beneficial State Bank, a community development bank. These institutions are FDIC insured, just like the big banks, but provide greater transparency in how your deposits are used.
In some cases, they offer a better interest rate than your typical bank. The Aspiration Summit bank account, for example, carries no monthly service fees, free ATMs around the world and a 1% annual percentage yield.
“Every dollar is a vote,” says Simon. “You get to make that vote every time you do something with your money.”
What is your savings and spending funding?
In a low-interest-rate environment, you’re not earning much on your savings. Simon suggests you can get better returns — and put your money to better use — by placing savings in social impact portfolios, which could earn you 1% to 4%, depending on the term.
An institution like Calvert Foundation, for example, offers an investment product called the Community Investment Note. Calvert Foundation has raised over $1.5 billion from more than 18,000 investors, many of them individuals putting in as little as $20. The money is then invested in hundreds of organizations, projects, and funds that, the organization reports, are making a measurable impact around the world.
While the portfolio is not FDIC insured, the institution has levels of protections on its investments, and in its 22 year history has paid back 100% of its investors on principal and interest.
And what about your spending?
“Every day we’re making spending decisions based on cost, quality and convenience,” says Cherny. “Now consciousness is a part of it, too, because we have the data and tools to follow it.”
Those who have an Aspiration bank account have access to the Aspiration Impact Measurement, which is a “people” and “planet” score given to each place you use your debit card. That way, when going for your routine purchases at the drugstore, you can see if Walgreens or CVS is more aligned with your values.
A similar service is offered by Swich, without the bank account. The site scores businesses on dimensions of health, the environment, how it treats workers, local and global impact.
Are you investing ethically?
As a conscientious consumer, you make socially responsible choices for people and the planet with your purchases, but when you find out your mutual fund is invested in fossil fuels, all your efforts may feel for naught.
At the very least check with your mutual fund company to see if there’s a social impact option, like Vanguard’s Social Index Fund or Fidelity’s Select Environment and Alternative Energy Portfolio.
If you want to take the next step you can invest with an investment firm with a socially responsible emphasis like Swell or Betterment. Aspiration’s Redwood Fund, for example, is fossil-fuel free and fire-arm free and has a $100 minimum to invest. The IRA offered by the firm, similarly, invests in sustainable companies.
This is an area pumped and primed for young people, say impact investors.
“Millennials need to be front and center in this conversation,” says Simon. “Don’t just be a passive consumer, be an active participant in what impact will mean.”