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Banks around the nation are investing deposits in a grassroots effort to help promote environmental projects, including recycling, new technology, organic farming and other "Earth-friendly" products and services.
The community-based economic development industry began 40 years ago as a handful of community development corporations with roots in the struggle for civil rights in the 1960s.
But new to the socially responsible scene is "green banking," in which banks are giving customers the option to invest interest on their deposits in a socially "responsible or sustainable" environment, according to Todd Larsen, managing director for Co-op America and the Social Investment Forum Foundation, a New York-based nonprofit member association dedicated to promoting the concept of socially responsible investing while educating consumers and investors on how to invest their money in a socially responsible way.
"We are encouraging all investors to take 1 percent of their investments and direct those assets toward low-income communities that are overlooked by traditional investors," said Larsen. "This puts money into communities and helps to promote the building of housing, create jobs and create businesses in those communities."
Larsen said the growing movement these days is investing in environmentally friendly resources in an effort to combine ecological concerns and social concerns, a movement from which the notion of green banking was formed.
Community investment lenders look at companies that pioneer new technology in an environmentally benign way, which includes recycling and organic farming and fisheries, in an effort to increase the knowledge of environmentally safe products and services.
The Social Investment Forum, a 2-year-old organization with more than $5 billion is assets, promotes investments that are different from Community Reinvestment Act requirements, according to Larsen.
Community development financial institutions are focused primarily on green banking and socially responsible lending "rather than lending because it's a federal requirement," said Larsen. "The success is incredible and it shows with the work that is being created ... jobs are being created in communities that really need it and housing is developed in low-income communities," said Larsen. "It shows that the smaller investors are just as safe and sound as the larger banks."
While banks as large as FleetBoston and Banknorth participate in socially responsible banking, a majority of the participation comes from smaller banks.
"We feel it's important to put resources back into our community and develop strong healthy communities," said Cynthia H. Gubb, vice president and director of Community Development at Chittenden Bank in Burlington, Vt.
Gubb described socially responsible banking at Chittenden as linking depositors with specific loan programs to provide for affordable housing, business and economic development, conservation and agriculture, community facilities and education.
Gubb said socially responsible banking helps to facilitate positive change in local communities by providing an important source of lending capital and "Chittenden will match a customer's contribution with an interest rate subsidy for the borrower."
"There are certain deposit accounts to sign up for and we designate those deposit accounts to support one of the loan programs," said Gubb, who also noted that the $2.8 billion bank sends out a quarterly newsletter with information on where loans are being distributed. "So far, we have $146 million in deposits for the program ... and we have been encouraging our branches throughout New England to join in."
Chittenden Corp. operates the Bank of Western Massachusetts and Flagship Bank & Trust Co. in Massachusetts, although those institutions do not participate in the green banking program.
In the Bay State, Wainwright Bank & Trust Co. continues to finance environmental initiatives by working with organizations related to wilderness preservation, identifying the links between environmental exposure and breast cancer in women and the conservation of natural resources.
"Depositors do business with us because they know we are going to loan it out to environmentally conscious companies," said Steve Young, senior vice president of marketing at the $495 million-asset bank.
Wainwright offers customers a "Green Loan" option, which gives a reduced-rate home equity loan to homeowners who install a solar energy system and, according to Young, Wainwright has spent $250 million in socially responsible lending and community development lending over the past 10 years.
'Key Tool' Coastal Enterprises in Maine provides financial and technical assistance for development and expansion of industries, small businesses, housing and social services.
Anna Ginn, senior development officer of the organization, said local banks are the biggest contributors to socially responsible investments.
"Our mission is to help Maine people and communities, particularly those with low incomes, reach an adequate and equitable standard of living, learning, and working in harmony with our natural environment," said Ginn. "We target our financing to low-income communities in Massachusetts, New Hampshire and Vermont. Financing is our key tool for social change."
Ginn said Coastal Enterprises works with banks, credit unions and financial institutions to focus on natural resource sectors with "increased focus on equity, economy and the environment."
In most cases, the small business and nonprofits benefiting from green banking are unable to access traditional financial institutions and other revenue sources.
Ten CDFIs, which included banks, credit unions and financial institutions from across the United States, were highlighted by the Community Investing Working Group as leaders in providing financing for small businesses and other organizations to create environmentally friendly products and services in their communities, and aid in the advancement of the grassroots initiative of green banking throughout New England.
Earlier this month, the Social Investment Forum recognized
10 financial institutions for their work in socially
responsible investing and green banking, including Wainwright
Bank and Chittenden. As another organization recognized
by the Social Investment Forum, Coastal Enterprises
receives funding from one of its 18 participating New
England banks, money that Ginn said is used for a variety
of programs ranging from equity investments to low-interest
loans that are reallocated to the community.
"Banks get CRA credit for working with us," said Ginn, who confirmed that Banknorth and KeyBank, both based in Maine, and Boston-based Fleet Bank are contributors to Coastal. "A number of banks have lent us money toward environmental sectors and we re-lend that money to a spread [of organizations] that incorporate higher risk and to operate the funding."
While some funding comes from state and local government foundations, Ginn said 14 Maine banks have agreed to provide $30 million for affordable housing, which she said helps in the promotion of green banking. ^ back to top ^
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