Want your money to do good in the world? Many of us do and an easy way to do that is to keep your money OUT of the least ethical banks around.
In the US, the four least ethical banks are easy to spot. It’s Chase, Wells Fargo, Bank of America, and Citi Bank. They are all terrible. Like, the bad guy in a Disney movie terrible.
And when we use these banks, we aid them in their terribleness. Let’s explore how that works, and how we as customers can take back our power from these giant corporations.
How Banks Work In the First Place
Banks are two things at the same time: a place for people to store money long and short term, and companies themselves, looking to make a profit. Banks play a crucial role in the overall economy by acting as the intermediate between savers and borrowers.
When you, a bank customer, deposit money into a bank, you’re essentially entrusting the bank with your money.
The bank then uses that money for various purposes, including investments. We call the process by which banks utilize customers’ money for investments “fractional reserve banking.”
Fractional reserve banking is a fancy way of saying that banks are required to only hold a fraction of their customers’ deposits as reserves. The rest of the deposited funds can be lent out or invested.
So if 100 customers put in $1 million, the bank only needs to keep a portion of that $1 million IN the bank- the rest they can invest in things to make money.
This system allows banks to leverage their available capital, generating income through interest on loans and investments. The reserves are held to meet withdrawal demands and maintain the stability of the financial system.
One primary way banks use customers’ money for investments is through lending. Banks provide loans to individuals, businesses, and governments, earning interest on the money they lend.
Mortgages, personal loans, and business loans are common examples of how banks deploy customer deposits to stimulate economic activities. The interest charged on these loans constitutes a major source of revenue for banks.
So, the next logical question is: what the heck is my bank investing in? Well, if you bank at one of the top five least ethical banks, it’s probably fossil fuels, emerging tech like AI, real estate, and some form of life insurance.
These Banks Are Monopolizing the Industry
The Financial Times reported in November 2023, “Of the nation’s almost 4,400 banks, the big four made 45 percent of the industry’s overall profits in the third quarter. That was up from 35 percent a year ago, and well above the 10-year average of 39 percent.”
The same article also shares a damning statistic: 40% of deposit accounts at these four banks pay out 0% in interest. That means, for MILLIONS of Americans using these bank’s savings accounts, they are making NOTHING in interest.
And with inflation being so high, that means something even worse: any American using a savings account at Chase, Bank of America, Citi, or Wells Fargo is LOSING MONEY because inflation is eating away at the value of their money and they are not earning interest.
It’s important to note that while banks use customers’ deposits for investments, they also bear responsibility for safeguarding those deposits. Regulations and oversight from central banks and financial authorities are in place to ensure the stability and integrity of the banking system.
Banks must strike a balance between generating profits from investments and maintaining sufficient liquidity to honor withdrawals and financial obligations.
Where the Least Ethical Banks Are Investing Your Money
Since the 2016 Paris Climate Agreement, Chase Bank alone poured $430 billion into funding fossil fuel production. And that’s just ONE bank!
A 2022 report from Banking on Climate Chaos shows that U.S. banks dominate fossil fuel financing, accounting for 28% of all fossil fuel financing in 2022. Chase Bank remains the world’s biggest funder of climate chaos since the Paris Agreement.
Our other three least ethical banks, Citi, Wells Fargo, and Bank of America, are still among the top 5 fossil financiers since 2016.
Let’s take a closer look at how these banks use your money.
Bank of America
As of January 2022, Bank of America has faced criticism and scrutiny for its environmental practices, particularly regarding its involvement in financing fossil fuel projects. Here’s a general overview of the environmental criticisms against the bank:
Tar Sands Investments: The bank has been associated with funding projects related to tar sands, which is an extraction method for oil with significant environmental implications, including deforestation, water pollution, and habitat disruption.
Coal Financing: The bank has faced criticism for its financing of coal-related projects. Coal is considered one of the most environmentally damaging energy sources due to its high carbon emissions and environmental impact, including habitat destruction through mining.
Arctic Oil Exploration: Bank of America has been linked to financing projects involved in Arctic oil exploration. Such projects are controversial due to the delicate ecosystems in the Arctic region and concerns about potential oil spills and their environmental consequences.
Citi Bank
Citi Bank is a perfect example of how powerful our money can be. Citi is one of 17 banks that funds the Dakota Access Pipeline. The DAPL faced widespread protests due to concerns about its potential impact on water sources and indigenous lands.
Citi has also invested $332.9 billion into fossil fuels since the Paris Climate Agreement. Imagine all the solar or wind energy projects that $332.9 billion could fund!
Chase Bank
Oh, that I had enough time to list Chase Bank’s terrible investments. In 2022, Chase CEO Jamie Dimon said the bank was increasing its investments in gas and downplayed the impact of gas on climate change.
Chase Bank also chronically underpays its workers, leaving the taxpayer (that’s you and me) to supplement Chase employees’ living needs through government-run programs. Who could forget Rep. Katie Porter taking Dimon to school about the fact that he earns tens of millions per year and his workers are on food stamps?
FYI, Dimon will earn $36 million in 2024.
Wells Fargo
I made an Instagram video all about how much I hate Wells Fargo. I like to refer to them as my financial nemesis because they are just THAT BAD.
Besides the fact that Wells Fargo opened MILLIONS of fake accounts in customers’ names without their permission or knowledge, they were fined $3 billion for it!!! They also are the world’s third-largest investor in fossil fuels. If we could get JUST Wells Fargo to stop investing in fossil fuels, there would be radically fewer climate disasters.
Green Places to Keep Your Money
Atmos– Atmos is a green fintech company that partners with banks to invest in solar energy. They have absolutely no fossil fuel investments as a company! Plus they offer high-yield savings accounts, which means that when you use them your money is making money AND is green.
Take Action and Tell These Banks to Do Better
Help these four banks go from the least ethical banks to being better banks.
Bank.green is a website where you can check if your bank is funding fossil fuel projects and helps you find a new bank to switch to. Divesting your money from these banks is THE biggest action you can take to tell them that you don’t like their behavior.
Invest in better companies. You might be investing in the least ethical banks via your investments in your 401k or IRA. If you’d like to take your money out of them in your investments, you can do that too! Our sustainable investing course helps you divest from crappy companies as well as provides a list of more sustainable funds for you to invest in.
Read More About Personal Finance:
- How to Balance Saving Money vs. Spending Money
- How to Retire with Lean FIRE
- How to Handle Your Finances: Sandwich Generation Edition
- How to Start Investing Past 40
