Which criteria do we use to decide if a bank is good or bad?
One of the indicators to evaluate whether a bank contributes to a better society is the percentage of assets used to grant loans to individuals and companies. In this case, banks members of the Global Alliance for Banking on Values (53 international ethical and sustainable financial institutions) based in Europe (23 of these banks) in 2017 destined 77% of its assets to loans, while the traditional European banks only allocated 40.52%, according to the “Report on Finance and Ethical Banking in Europe“ recently presented at the European Parliament.
Another traditional indicator to measure the impact of banks is their performance in terms of return on equity (ROE). In this case, members of the Global Alliance for Banking on Values have a return on equity of 3.98% compared to 1.23% of traditional banks.
During this week the Global Alliance for Banking on Values celebrates its 10th annual summit in Vancouver (Canada) under the title“Migrants, #MeToo and Melting Icecaps“, showing clearly the purpose of this group of banks; contribute to the great social and environmental challenges of society. This network of ethical and sustainable banks covers the five continents, having ethical banks in countries such as the United States, Australia, Malaysia, Uganda or Peru.
What is it that makes these ethical banks different from traditional banks?
Very simple, these banks just take the savings from people or companies and direct give loans to people or companies. This means they completely separate their banking activity from financial activity, that means if you give your the money to these banks they will only allocate it to people or companies with a positive, social and environmental impact in their projects, they will never allocate it to other activities where you would not like to be involved like certain extraction companies, weapons industry, etc.
In the event that you do not want to save your money but invest it these banks will advise you on which projects to could invest like renewable energy, tree planting or social impact projects, they will never be projects that have a negative impact on social or environmental issues.
A very simple way to know if you enter an ethical or a traditional bank is when you get into the bank in order to save your money and come out with a porcelain china, a smartphone, a television or any other gift that you did not need, so in that case you probably entered a traditional bank but If you enter a bank and get out with your savings safe you may have entered an ethical bank.