As big banks struggle to decarbonize, midmarket leaders prove ‘there can be margin in the mission'
The past 12 months have seen a flurry of pledges from large banks around the world to participate in the transition to a net-zero economy. Many leaders emphasize how difficult this work will be. But for other smaller, midmarket players, these sorts of commitments have been a point of differentiation for years.
Global Alliance for Banking on Values member Amalgamated Bank stopped lending to fossil fuel businesses in 2016. Virginia Community Capital (VCC), a Richmond, Virginia-based community development financial institution (CDFI) began building capacity to lend to commercial solar developments five years ago and specializes in helping installations worth as little as $50,000 get up and going. Dozens of other banks around the world have joined the GABV, which requires its members to follow strict low-impact and sustainable practices. And some have become B Corps by demonstrating strong social and environmental performance.
According to every source reached to report this story, that focus on values and addressing climate risk derives from one single factor: farsighted leadership. "Because environmental sustainability is one of our top priorities as a business, we have always had the executive support required to both pursue environmental lending and avoid resource extraction lending," said Jae Easterbrooks, vice president, and relationship manager for Beneficial State Bank. When the top person says, ‘Let’s do this,’ everyone else says, ‘OK, we’ll figure out how to do it.’
Good intentions aren't enough, and there are and will be, lots of challenges. One strong indicator of a bank’s DNA can be found in the organizations banks have joined. From a climate impact perspective, GABV sits on the most impactful end of the spectrum. Therefore, the keys to decarbonizing lay in overcoming challenges, strong leadership, and a company DNA focusing on values.