The more I learn about injustices in the world, climate change, and the needs in my community, the more I ask what I can do to help bring about positive change. Beyond donating to causes or volunteering my time, are there other actions I can take to make a difference? Where can I be more conscious of my choices?
As a financial advisor, my first consideration is my money. Money is a powerful tool. For better or worse, access to it can change lives. Am I making choices with my money that I feel good about? Beyond smart charitable giving, can I use my money in a way that has a more positive impact?
I’ve learned how to improve my impact and found several changes I can make to use my money for good. For me, this means money is used to benefit my community, advances the change I want to see in the world, and challenges some of the hidden inequities behind our financial system. Here are three ways I’ve created a positive impact with my money and how you can evaluate your finances, too.
Consider Socially Responsible Banking
The first place I started is where I bank. Traditional banks take our deposits and lend them out for the most profit with the least amount of risk. This means most banks use practices that funnel money to communities and businesses who are the most credit worthy or financially secure (i.e. the least risk of default). Unfortunately, many people in minority communities won’t qualify for these loans which would otherwise allow them to buy property or start businesses. This lack of access to traditional banking can also lead to these communities relying on payday lenders or other predatory lending practices.
The good news? There are better options for banking that encourage more access to credit for underserved communities while providing traditional banking services.
Community Development Financial Institutions
My search for a new bank started at CDFI Fund, an organization of community banks focused on providing financial services to underserved communities. Community development financial institutions (CDFIs) are credit unions and community banks that serve and offer banking solutions to low-income communities and under-banked people. Deposits at these institutions have FDIC coverage just like other banks.
Global Alliance for Banking on Values
Another place to find a socially responsible bank is through GABV or Global Alliance for Banking on Values. This is a global network of independent banks seeking to deliver sustainable economic, social, and environmental development.
Member banks seek to create positive change in their communities through their banking and lending practices. The products and services GABV banks offer are developed to meet the needs of people and safeguard the environment. On top of doing good, they also offer competitive interest rates on deposits and all the typical banking services found at other banks.
Who you choose to bank with has a social and environmental impact. If you’re concerned about typical lending and banking practices and their impact on your community, it might be time to consider switching banks to an institution that aligns with your values. One way to better understand what you value most is by taking the Financial Archetype Quiz, which can help clarify what your relationship is to money.
Become a Conscious Consumer
In addition to my banking choices, I’m also reconsidering the impact of my shopping habits, both in quantity and where I am buying from. I have two young kids, and between clothing, food, and school supplies it feels like I’m always buying something. All of these purchases have a social and environmental impact.
Admittedly, the process of evaluating my daily shopping choices can be pretty involved. To practice being a better consumer, two simple guidelines I’m now following are buying local and buying from B Corps when I can.
Buy Locally or Nationally
First, I start my shopping close to home. If I can buy something made in the USA – or better yet, made locally – I can safely assume it comes with reduced transportation-related carbon emissions compared to an item purchased overseas. In addition, it’s likely the US factory that created my product must comply with stricter emissions standards than a factory in China or other developing nation. Keeping my spending local also means more of those dollars stay in my community, spurring local job growth.
Support Certified B Corp Businesses
The second thing I’m looking for is whether the companies I buy from are a B Corporation. B Corp is a certification for companies that meet strict requirements for environmental or social performance. Companies operating as a certified B Corp have made a commitment to stakeholders to balance purpose and profit. Each B Corp may have different goals and commitments, but overall they operate in a way that positively impacts their employees, their community, and the environment. If the alternative is shopping with companies who haven’t considered these items, I’d rather send my dollars to a B Corp.
Align Your Investments with Your Values
The final part of using my money for good makeover is evaluating where I invest my money. Investing in stocks and bonds can be a great way to build wealth over the long run. However, investing in anything and everything available can mean the wealth built came with business practices, environmental damage, and social harm I don’t want to take part in.
There is a better way. Impact investing and socially responsible investing (SRI), also known as environmental, social, and governance (ESG) investing, are ways to invest your money that consider both financial returns and overall impact on the world.
Switching my investments to an ESG model is a simple way I’ve continued to build wealth while avoiding those companies whose practices I don’t agree with.
With ESG investing, certain environmental, social, and governance values criteria are set to either screen out companies or invest further in companies. The environmental component addresses the company’s impact on the planet, like their carbon footprint or if they invest in climate technology, for example. The social aspect considers the company’s business relationships and their effect on people and social justice. Finally, the governance component relates to how the company is run. For example, whether their board is diverse or if the company uses accurate and transparent accounting procedures.
Because each one of us has different convictions and investment needs, it’s important to research values-informed investing and work with a financial advisor who can guide you to a socially responsible investment strategy or ESG portfolio that supports your values and financial requirements.
Maximize Doing Good With Your Finances
Doing good with your money goes beyond just charitable giving. It means making more conscious choices with how we save, spend, and invest. Money is power and I want to use my power for good. Though it can take a bit more effort to choose options that use money for good, the end result is knowing I’m making a positive impact on the community around me.
To learn more about how you can align your money with your values, speak with an Abacus advisor by scheduling a call today.