How ESRAG applied the 4-way test to their banking, and how you can, too!

by Larry Hands and Rob Sisson

Ethical banking practices: Using your money to support your values

Banks lend out the money you deposit to other people (which you’ll know if you’ve seen “It’s a Wonderful Life!”). Some banks lend it to businesses which might not be so aligned with your values.  Ashley Orgain, Chief Impact Officer for Seventh Generation, spotlights your opportunity:  I thought Seventh Generation was doing everything we possibly could to act on climate. I was wrong. I had overlooked one of our greatest climate powers—our finances.” 

Rotary’s Four-Way Test is an excellent guide throughout this process, and it’s exactly what ESRAG used to understand their options and move forward. Let’s look at the different steps first. We’ll go through a few case studies while we do, including the decision by ESRAG’s Directors to open an account with Green Penny Bank, which underwrites loans for solar projects.

 Here’s an overview of how you can apply the Four-Way Test:

Is it the TRUTH? Find out what your bank does with your money. Look at different sources (not just the bank’s website) to correct for bias.

Is it FAIR to all concerned? Talk to your bank first, before doing anything else. This article includes some sample questions. Be patient, but firm, in encouraging change. Consider the future generations and the impact the bank’s investment will have on them.

Will it build GOODWILL and BETTER FRIENDSHIPS? Make sure to work with and support your bank.

Will it be BENEFICIAL to all concerned? Will leaving the bank straight away actually be the best for the planet? Will it be beneficial for the bank? Will it be beneficial for you?

Step 1: Is it the Truth?

Start by finding out what your bank does with your money. You can do this by using lots of different websites, such as Bank FWD, Banking on Climate Chaos, and topofinance.org’s The Carbon Bankroll 1.0. 

You can also find research and articles on your bank’s websites, for example:

Barclay’s response to financed emissions report and 

JP Morgan’s Task Force on Climate Disclosures Report

Search one of the following on a search engine to get started: “[your bank] annual report,”

“[your bank] ESG report,” “[your bank] climate report 2024,”“[your bank] financed emissions.”

But to correct for bias, make sure you don’t make your bank your only source.

Step 2: Is it FAIR to all concerned?

Next, talk to your bank.

Follow the Rotary International Action Plan, and ENGAGE with them. It’s much fairer than just moving your money out just because you read an article or two. Give them a chance to ADAPT.

As Katherine Hayhoe, lead scientist for the Nature Conservancy, keeps saying: The most important thing you can do to fight climate change is talk about it. Check out her fab Ted Talk here! So talk to your bank about it.

But what should you say? What questions should you ask?

We recommend clarifying that you check to see if the research you found online is true and give the bank a fair chance to explain themselves. You can ask things like, “Is what they say in [report name] true?”

There are five main things you want to find out about your bank:

1. What climate goals do they have, and what progress are they making?
2. How do they use client deposits? Are they being used in a way which doesn’t align with your values?
3. Has the bank made public climate commitments, and how credible are these claims?
4. How does the bank manage climate and nature risk? 
5. Does the bank have good climate governance and accountability? Is the board involved?

There is a lot more detail in Aligning Your Company’s Banking with its Sustainability Goals. This report by Bank FWD and The Outdoor Policy Outfit views the issues from the perspective of a business. It also has some great template emails which you can use if you’re wanting to transition your company as well!

Case Study: NYC Comptroller & Public Pension Board Success

Here is an example of what can be done when we engage with each other and act in everyone’s interest.  JPMorgan Chase, Citi, and Royal Bank of Canada recently agreed to disclose the climate as a result of New York City talking to them. There’s lots more around this success story in this report from the NYC Comptroller’s Office. 

Step 3: Will it build GOODWILL and BETTER FRIENDSHIPS?

When speaking with your bank, avoid starting off with threats to leave. Instead, begin the conversation in a courteous and positive manner. The goal of your discussion is to understand their perspective and encourage positive changes.

If you’re looking for tips on how to talk about climate issues, check out the ESRAG webinar on this topic (insert ESRAG webinar on climate messaging) and explore the rich resources available from the Yale Program on Climate Change Communication. Press here!  

Even if your bank’s practices don’t align with your values, remember that the people working there are still parents, children, and family members—just like you. Asking them about their perspectives and trying to understand their views is a fab way to move forward, and it builds better friendships. Who knows:  maybe one day they’ll be interested in climate as well – hopefully before it’s too late!

Case Study: Patagonia – We’re in this together

Patagonia has also done some fantastic work where they are aligning their struggles with the struggles of their bank. They are on the same side, and understand the difficulties in detail – there’s no need to empathise because their experience is the same.

“We’ve spent the last five years reorganizing our banking structure and cash management

strategy while continuously engaging with our banks, all with a focus on eliminating the

financed emissions that result from Patagonia’s cash and pushing our banks to align with global climate goals just like we do with our manufacturing supply chain partners,” says Charlie Bischoff, Patagonia’s Treasury Director. Check out “The Carbon Bank Roll 2: From Awareness to Action.”

Step 4: Will it be BENEFICIAL to all concerned?

This is the trickiest one, as it can seem like there is a conflict if the bank isn’t making changes. It’s important to make sure that the way you act doesn’t harm the bank and those they are financing, especially if they are doing their best to transition.

We’ve put together an email template you can use to reach out to your bank. We’ve crafted it to convey your message in a way that is firm yet kind.

Hello [Name],

I’m writing as one of your concerned customers as I recently found out about financed emissions and would like to understand a bit about what [bank name] is doing in this regard.

I’ve got lots of questions, so I’ve numbered them to keep us both right – I hope you don’t mind!

A bit of context; I’m passionate about my family and our future generations, so I’d really like to make sure there is a planet for them to live on in the future. As a result, I care a lot about sustainability, nature, and the climate.

I saw [report name] and firstly, I’d like to ask 

1. Is what they have said in [report name] true?

Next I’d like to understand:

2. What climate goals do you have, and what progress is being made towards these goals?
3. How do you use my deposits? Are they being used in a way which goes against my values of sustainability?
4. Has the bank made public climate commitments around climate change? What has the bank done so far to meet those commitments, and how are you measuring progress?
5. How does the bank manage climate and nature risk? 
6. Does the bank have good climate governance and accountability? Is the board involved with climate and nature decision making?

Thank you in advance for taking the time to respond. I understand this may be a difficult topic to discuss. I am not threatening to change banks and so I hope this can be well received as encouragement to continue the work you are no doubt doing.

How ESRAG chose Green Penny Bank

ESRAG’s main bank was JP Morgan. So we looked online at the reports from a variety of sources to properly evaluate our next steps. 

We made sure what we were seeing was the TRUTH. ESRAG found that JP Morgan financed things that didn’t align with the values of ESRAG.

We didn’t move all our money straight away, as that wouldn’t be FAIR to JPM, but rather opened an account with another bank.  Decorah Bank and Trust – to run alongside our JPM account. Decorah Bank and Trust community bank is based in Iowa, and serves an agricultural area and a county seat. This bank had a virtual branch called GreenPenny that uses deposits to underwrite loans for solar panel installations. 

We chose Green Penny as it aligns with ESRAG’s values. Although we can’t count the solar panels we help finance towards the Million Solar Panels project, we know it’s still moving in the right direction! 

On top of this being a values-driven decision, you might be pleasantly surprised to know that the interest rate that we are receiving is significantly better than what we were getting at the big bank, and our deposits are FDIC insured. The FDIC insures deposits to at least $250,000 per depositor, at each FDIC-insured bank. 

Based on some work from Colombia University, which draws on the Lawrence Berkeley National Laboratory’s research, ESRAG understands that an acre of solar panels installed to replace natural gas reduces over 200 times more carbon dioxide per year than an acre of forest 

This is not to encourage chopping down trees, as there are biodiversity and social benefits as well as carbon dioxide removal benefits to (lovely) trees, but this is to put into perspective how impactful solar panels are.

This means ESRAG’s money is safe, has a better return, and creates lots of impact.

So it’s BENEFICAL to ESRAG and to the planet. Plus we’re not divesting from JPM, so we are building GOODWILL and BETTER FRIENDSHIPS with them.

You can find other socially and environmentally-responsible banks here If you have a financial advisor, you can ask them!

ESRAG is not a financial advisor and we cannot tell you what to do with your money. Still we invite you to consider where you keep your money, how you can be an active customer of that bank, and whether there are equally safe ways to invest your money that better match your values. 

Larry Hands is a founding board member and past treasurer of ESRAG, and a member of the Arch Klumpf Society and the Rotary Club of Madison.  Rob Sisson is a member of Tynside Rotaract in Great Britain and a consultant on business sustainability.