Green Banking

Folks, I’m here today to talk about “Green Banking,” a phrase I would like to add to the banking lexicon here and now. “What?!” you say. “Banks have developed a religious devotion to MONEY since the first merchants started charging interest centuries ago.” True. But the “green” I’m talking about is a daily topic in practically every newspaper across the country – the environment and a dangerous rise in the emission of greenhouse gases.

I started thinking about Green Banking during a recent business trip to Chicago. Outside my hotel room door on the morning of check-out was the omnipresent USA Today. On the front page of the business section the headline screamed, “Bank of America Raises ATM Surcharge.” With industry trendsetting aplomb, BofA announced it would be raising ATM fees from $2 to $3 for non-customers that withdraw cash from a BofA ATM. A senior analyst at Bankrate.com commented that “banks often move like a school of fish… so it’s just a matter of time before others follow.” Nice compliment on our industry, huh? Right below the BofA article was a piece about an important decision made by a federal judge in Vermont holding that states have the authority to regulate carbon dioxide and other greenhouse gases. This is a big deal. California is leading the way in this area, requiring auto manufacturers to cut CO2 emissions and increase miles per gallon. Eleven states have adopted California’s regulations verbatim and another six are not far behind. Despite the bad press BofA and banks in general are receiving about nickel and diming their customers in a tough margin environment, I think banks can play a huge role in combating global warming and take a socially responsible corporate role. My nutty theory is this: I believe banks can be Green Bankers while also making the other kind of green (and if you’re innovative in finding those niches, lots of it). Heck, hedge funds and private equity firms that invest in “socially responsible” companies are sprouting like organic mushrooms.

“We’re bankers,” you’re probably saying to yourself. “What does our industry have to do with any sort of green revolution?” Plenty, I say. And it will start with your customers and come full circle to your organization. No matter one’s political leanings, protection of the environment and a reduction of greenhouse gases is an idea your commercial and retail customers can support. And I believe a majority of bank customers, when faced with a choice between a commodity product offered by a Green Bank and one offered by Nickel and Dime Bank & Trust across the street will go green.

As we head full swing into strategic planning season and managers across the country are polishing up their PowerPoint presentations on net interest margin, their lack of fee income, and a challenging regulatory environment, let’s inject some new ideas into that discussion. I don’t believe Green Banking is for every institution out there, but just to get the juices flowing, here are some ideas that might be worth discussing – especially if we can make some green or cut some expense.

Retail

• Consumer lending has long been the bane of our commercial bank clients, but here are some ideas that might prime the pump (pun intended):
  • How about a 25 or 50 BP discount on car loans for alternative fuel vehicles? A number of credit unions and a few banks are offering this deal.
  • This same discount concept could be applied to financing for vehicles that get, say, 35 MPG highway or better.
• Favorable mortgage loans for borrowers that buy/build energy efficient homes.
• Cornerstone client Rabobank, a Netherlands-based bank with a substantial presence in California, has introduced the Climate credit card in partnership with the World Wildlife Fund. The total CO2 footprint of all credit card purchases is offset by Rabobank through the purchase of an equivalent amount of CO2 credits for renewable energy projects in developing countries. Think bank customers don’t care that much about going green? Tell that to the 1.1 million cardholders Rabobank has garnered since April.
• Favorable home equity loan/line products for your customers undertaking a green renovation like more efficient air conditioning units, double-pane window and door replacements, low flow faucets and low flush toilets – the options are numerous.
• Chittenden, the largest bank in Vermont, offers a socially responsible banking program allowing customers to forego higher interest rates in their deposit accounts so the bank can lend to community development and “green” projects. Now that’s a way for community banks to separate themselves from the nationals.

Delivery Channels

• Promote Internet banking and bill pay as a way your customers can have a positive impact on the environment. Today’s Internet banking offerings are rich in functionality that can prevent an unneeded trip in the car to the local branch. Similarly, for every bill paid on line, there is one less bill that a mail carrier must pick up from your house in the mail truck, bring to a mail processing facility (which has a huge carbon footprint), which then gets transported to the recipient either by vehicle or plane (both of which emit greenhouse gases).
• A similar green message could be used to promote e-statements – save fuel and trees at the same time.
• Remote check deposit from home is another way to prevent that car-powered trip to the branch.
• If you do have to make that branch visit, heed the call of Tucson Federal Credit Union, which has opened one “bike friendly” drive-thru lane at each of its branches.

 

Commercial

• Despite the $3 ATM fee, BofA is taking a leading role in fighting global warming. In addition to its green lending initiative where the bank has changed its underwriting criteria favoring businesses that make less carbon intensive products, what I find particularly interesting is BofA’s carbon credit trading program focused on advising customers how to manage their carbon operations, taking carbon positions and trading the credits.
• There are countless opportunities for commercial banks to lend to green friendly companies and start-ups: organic farms, recycling businesses, ecotourism, clean energy production companies (solar, biofuels, wind, hydro), ethanol producers, etc., etc., etc.

Wealth Management

• Offer your wealth management customers investment choices including socially responsible investing (“SRI”) options. There are lots out there to choose from.

 

YOUR INSTITUTION

As branches continue to proliferate like spoof videos of Britney Spears’ MTV appearance on YouTube, your facilities manager should take a good hard look at the U.S. Green Building Council’s Leadership in Energy and Environmental Design (“LEED”) green building rating program, which reviews such areas as energy consumption, water use, materials and resources, and indoor environmental quality. Goldman Sachs, J.P. Morgan Chase and BofA are all pursuing New York skyscrapers that have at least a Gold rating (there are four ratings – Certified, Silver, Gold and Platinum). However, only one bank, Banner Bank of Walla Walla, WA, has an 11 story building in Boise, ID, that is the only Platinum rated bank building in the country. While there is no doubt that construction of a LEED rated building costs more at the outset, countless studies have shown that the extra costs are recouped in fairly short order, offering substantial long term savings and a way for banks to take a green lead in all those buildings they’re putting up.

 

The basic point is this: As an industry that has the potential to have a tremendous impact on a greener future, banks have a duty to do what they can in promoting environmentally and socially responsible financial activities. There are enough creative ideas in this area to get a marketing executive drooling in anticipation about creating some valuable “spin” around bank products and services that have a beneficial impact on society. Maybe then the next time I pick up a USA Today I’ll see an article complimenting the banking industry rather than bashing it.

“Anybody who can imagine themselves doing something better than what they’re doing should just go ahead and do it, and not fear failure or success but just go for it. That’s all we’ve done.”  –Jerry Garcia

All for now.
-SAS

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