Better Banking

What’s the number one thing we as consumers can do to make the most difference for people and planet? Intentionally choose where we bank.

After assessing thousands of companies, The Better World Shopping Guide* ranks changing where we bank as the number one consumer decision we can make to contribute to a better world. Who knew where we bank could be so important? Perhaps even more important than where the closest ATM is.

And it’s a step that anyone with a bank account can take.

Why does where we bank matter so much?

The mega-banks that hold the most financial power wield that power solely for maximum profit. Their “too big to fail” status creates instability in the financial system, as we experienced in the financial crisis of 2008-09. They devote significant resources to speculative trading and hold too much power in political and regulatory systems. And at a more fundamental level, “the larger the lender, the smaller the percentage of small business loans in the bank’s loan portfolio,” according to the Small Business Administration.

Better, smaller banks wield their power in ways that build communities. Small and regional banks provide more than half of small business lending while controlling only about one-fifth of all banking assets. Small business lending becomes day care centers, local restaurants, craftspeople, retailers and service providers, which translate into local jobs and a high quality of community life. Their primary activity is turning deposits into loans and other productive investments, rather than speculative trading. Their decision-making is local, grounded in community needs and interests.

To be fair, the mega-banks also do some good things, employ some great people, and offer many customers products they like and need. The question is not whether mega-banks are terrible. The question is who do you want to wield the power of your dollars? Do you want your deposits used in your own community or a corporate headquarters across the country? To create local jobs or to create only profits? These are the choices we make by intentionally choosing where to bank.

The team at Just Money Advisors has been talking about the impact of community banking for years and has launched an initiative called Better Banking Options to gather and share information and encouragement for people who want to choose a better bank. The project’s website is launching soon at www.betterbankingoptions.com.

*Better World Shopping Guide by Ellis Jones. New Society Publishers, 2017.

Walking the Talk

Walking the Talk: JMA’s environmentally sustainable business practices

At Just Money Advisors, client portfolios are actively screened for environmental sustainability, aligning assets with clients’ imperatives to do what they can to mitigate climate change and to participate in growing efforts to regenerate soil, protect and conserve water, and support renewable energy sources.

But how, one might ask, is Just Money Advisors walking the talk in its own business practices?

First, we align our personal accounts with our commitments, just as we do for clients. This is our core business, our core value.  We also bank at Self-Help Credit Union, a Community Development Financial Institution based in Durham, NC, which provides capital to a range of projects focused on environmental sustainability.

Our most special public contribution is the garden of plants native to the Beargrass Creek Watershed. The green space around our little house-converted-to-office-building includes pollinator habitat, fruit and haven for birds and other small creatures, and a rain garden to absorb our water runoff. People walking by appreciating it, as well, and its contribution to our historic Louisville neighborhood was acknowledged with “The Blossom Award” a few years ago.

To our disappointment, solar engineers assessed our office building roof as too small for effective use of solar panels and suggested we cover our garden with solar panels instead. We declined, trusting the rabbits and birds approve of the choice.

Beyond the garden, our environmentally sustainable practices are among the basics—the daily choices almost anyone can make.

Minimum paper use. Technology allows for more tasks that have typically been paper-intensive to be done electronically, and we adopt those technologies where it makes sense for us. However, some processes still require paper documents, some clients who have chosen not to adopt some technologies still require paper documents, and mail still rolls in. Consequently, we cannot claim to be a paperless office, but we minimize paper use wherever possible.

Recycled office paper (100% recycled content, maximum post-consumer use) and paper products, as well as thorough recycling of paper (finely shredded, of course), plastics, glass, etc.

Energy efficiency. We employ programmable thermostats and fluorescent lighting. The office boasts energy-efficient windows and is also extremely well insulated by Project Warm, a non-profit organization that provides free weatherization education and services for low-income households in Louisville. They also occasionally sell and install insulation for small businesses like JMA.

Financial support for local environmental efforts, including Project Warm, Kentucky Interfaith Power and Light, Louisville Earth Walk, and the University of Louisville’s Sustainability Program.

These relatively simple efforts, made consistently over the years JMA has resided in Louisville, are important steps toward aligning our business practices with our commitment to environmental sustainability.

“Donated” but Not to Nonprofits

A useful investment tool is being twisted beyond its original purpose, to the detriment of nonprofits and all the people and causes they serve.

A donor-advised fund (DAF) can be a handy tool for giving away money in a particular tax year but delaying the choice of which 501(c)(3) will receive the funds. A donor might want to use a DAF to take tax deductions during periods of high earnings but still be able to make gifts later in life when income is lower, for example, or to accumulate donations over several years to make a larger gift to an organization. JMA helps clients create donor-advised funds where the client can decide that the assets be invested in line with their values and make gifts from those DAFs, when directed.

The idea of a DAF is that the money would, without too much deferral, be put to work by a nonprofit.

However, DAFs now hold roughly $85 billion in wealth, according to a recent report by the Institute for Policy Studies*–$85 billion that is essentially removed from the public good because nonprofits cannot currently employ the resources, nor can public budgets employ the tax dollars that would have been paid on the assets had they not been “donated.”

And yet brokerage houses and money managers make money on the investment process and donors got the tax deductions. True, the donor no longer owns the money, but while it remains inside a DAF, the donor can control how it is invested and, crucially, retain much of the political and corporate power that accompanies enormous wealth.

Although some DAFs have developed policies to encourage donors to distribute gifts, there is no legal requirement for DAFs to ever pay out their funds to qualified charities, and money is flowing in far faster than it is flowing out, meaning more untaxed dollars are accumulating in DAFs. And of the gifts that are designated from DAFs, almost 5% are made not to active charities but to other DAFs—within the letter of the law but surely not within its spirit.

The Institute for Policy Studies is among the groups calling for reforms that would force paying out within a certain timeframe to active charities, for example, and adding restrictions to ensure transparency and accountability.

“There are significant risks to warehousing wealth in large financial institutions at a time of extreme wealth inequality and undisputed public need for the services charities provide,” report authors Chuck Collins and Helen Flannery wrote in a widely distributed op-ed piece. “It’s imperative to correct the rules regulating these charitable vehicles to ensure the public good is justly served.”

 

*Chuck Collins, Helen Flannery and Josh Hoxie, “Warehousing Wealth,” Institute for Policy Studies, July 2018.  Available free at https://ips-dc.org/report-warehousing-wealth/.