We’ve been reporting about all the ways that design firms can make their businesses more sustainable, from limiting forever chemicals to getting your clients on board with more vintage furniture, but there’s one realm of greening your business that may come as a surprise: banking.
Perhaps you’ve heard about ESG retirement funds and made a mental note to look into them for your 401(k). Or maybe you’ve read the news about big universities like Harvard and New York University divesting from fossil fuels. However, most small business owners don’t think about the impact of their own finances on the earth. “[Small business owners] have a way to align their environmental values with their investments. It doesn’t even occur to most people that that’s possible,” says Leslie Samuelrich, president of Green Century Funds, a 32-year-old mutual fund company that invests in environmentally sustainable businesses and avoids climate-harming ones, including fossil fuels and tobacco.
“Banking was absolutely not on my list of what I thought I would be doing in becoming a B Corp,” says Chelsea Minola, co-founder of Bainbridge Island, Washington–based Grain Design, which has long prioritized social and environmental responsibility, and began the process of becoming a B Corp in 2019. But it should have been. Writing in The New Yorker, longtime activist Bill McKibben explains, “Any company or individual with cash in the bank has been inadvertently fueling the climate crisis. Such cash, left in banks and other financial institutions that lend to the fossil-fuel industry, builds pipelines and funds oil exploration and, in the process, produces truly immense amounts of carbon.” According to the study McKibben cites, if you have $125,000 in the bank, it’s producing as much carbon as the average American in an average year. “Interior design offices have so much money flowing in and out—even if you’re not holding it all, where that money sits can be really impactful,” says Minola.
When impact banking came up as a lever Minola’s business could pull to effect positive change, she was also all ears for business reasons. “We were with one of the big four banks, and I loathed them,” says Minola. “There was no actual person who was assigned to our accounts that I could build a relationship with. And when you have a business, you need a relationship with your banker, so that when you need something, you’re not coming out of the blue. They know you, and you can explain what you’re working on and what you need financing for.”
Switching to a green bank not only aligned with Minola’s values, but it benefited her business. Grain Design built a relationship with her contact at their new bank. She now has someone to talk to if they are exploring a line of credit; their banker got them first in line when PPP loans were distributed and has even introduced her to other sustainably minded design businesses in the Pacific Northwest. Minola also got her business on track to offer green investment options for its retirement plans.
Intrigued to learn more about how you can green your firm’s finances? Read on.
Move to a green bank
Banks provided $673 billion to finance the fossil fuel industry in 2022, according to the annual “Banking on Climate Chaos” report, authored by a group of nonprofits including The Rainforest Action Network and the Sierra Club. You can research environmentally conscious banks through Bank for Good. Minola landed on a local independently owned bank, Beneficial State Bank, which serves California, Oregon and Washington, is fossil fuel–free and is a certified B Corp. She also considered the East Coast’s Amalgamated Bank, another B Corp that is the largest union-owned bank.
Know that it won’t happen overnight
“It’s a huge thing for a business to change banks. It sounds easy, but it takes quite a bit of time to get everything sorted,” says Minola. In addition to changing all your automatic payments, you’ll need all of your outstanding checks and payments to clear the old account, so there will be a period in which you have two checking accounts open.
Assess your current retirement funds
If your retirement plan offers mutual funds, it’s easy to find out what you are invested in. Find the name of your funds, then go online to Fossil Free Funds and enter the names. The site will give you a breakdown of the fossil fuel exposure you have right now. (You can also research whether your funds are gun-free, prison-free, deforestation-free, weapon-free, tobacco-free and gender equal.)
Know your green investment jargon
When you start your green banking journey, you’ll begin seeing mysterious acronyms like ESG and SRI. ESG refers to a company’s “environmental, social and governance” rules that are taken into consideration when investing in companies. However, ESG ratings can be subjective, because there aren’t rigorous standards governing what counts as environmentally or socially responsible actions. A fund labeled ESG is not necessarily fossil fuel–free. SRI is short for “socially responsible investment”; these investment vehicles consider not only financial returns, but also the ethical, social and environmental impacts of the companies it invests in. However, like with ESG labels, a demarcation of SRI does not guarantee you won’t be invested in coal or oil and gas.
Find a green financial advisor
There’s a good chance you’ll discover you don’t have any existing green retirement options (less than 5 percent of 401(k) plans had ESG funds on their menus in 2020, according to the Plan Sponsor Council of America). Ask your business’s financial advisor if they can help you make the switch, but if you get pushback or a blank stare, you may also need to seek out a new advisor. Samuelrich points to Green America as a resource for finding a sustainably savvy financial advisor (there’s a certification for financial pros in the field of sustainable, responsible and impact investing).
Offer green retirement options
After you find an advisor, ask them to help you set up a fossil fuel–free retirement option for your firm’s employees. There are increasingly mainstream ways to do so: Even places like Vanguard, Fidelity Investments and Charles Schwab offer options, or let you access funds like the Green Century Funds through their platforms, says Samuelrich.
Highlight your green finances
“Another reason that we’ve seen smaller businesses want to do this is because it helps attract and retain employees, especially younger people who’ve grown up with more of an expectation that people are thinking about climate change,” says Samuelrich. Additionally, having climate- and socially conscious plan options can help motivate people to actually use their retirement plans.
Move your old investments
If you have a personal 401(k) from an old employer lingering in your investments—even if it is tiny!—you can and should move that to a greener investment vehicle as well through a rollover.
Wherever you bank, make sure your business has switched to e-statements to reduce paper waste. Likewise, if you use a payroll company, opt for direct deposit instead of paper checks.
Homepage image: Adobe Firefly
Laura Fenton is a writer with a special interest in the intersection between homes and sustainability, and is the author of the Living Small newsletter and two interior design books, The Little Book of Living Small and The Bunk Bed Book. She has written about home and design for nearly 20 years, and her work has appeared in many outlets, including Better Homes & Gardens, House Beautiful, Real Simple, and The Washington Post, as well as online publications and regional design magazines.