The Rise of Values-Based Banking: Prioritizing People, Planet, and Prosperity

Monique Johnson, the Senior Vice President and Director of Client & Community Partnerships at Beneficial State Bank, believes that the recent collapses of major US banks highlight a fundamental flaw within the banking sector – prioritizing profits over people and the planet. Instead, Johnson advocates for values-based banking, which focuses on a triple bottom line: people, planet, and prosperity.

In the case of Silicon Valley Bank, reports revealed failures in risk management and investor communication. Executives were aware of internal risk models predicting negative impacts on future earnings due to higher interest rates, yet they chose to change the models rather than altering their strategy. This short-sighted pursuit of profits, rather than fulfilling their fiduciary duty to protect investors and depositors, ultimately led to the bank’s collapse.

However, this issue is not exclusive to Silicon Valley Bank. The 2007 financial crisis was also attributed to the detachment of the financial system from ethical behavior and the real economy. As a response, values-based banking has emerged as an increasingly popular alternative. This model not only focuses on profits but also on the well-being of individuals, the health of the planet, and long-term prosperity.

Unlike traditional banking, which revolves around financial markets and trading stocks, bonds, and mutual funds, values-based banking directs resources towards the real economy. It invests in tangible assets, local businesses, and community development ventures, actively bolstering economic stability. By channeling resources to underserved individuals and enterprises, these values-driven institutions promote equitable regional development.

The urgency to find solutions that ensure access to financial services for all is evident from a 2021 FDIC survey which found that over 18% of US households were underbanked or unbanked. Embracing values-based banking is also financially sound, as younger consumers increasingly choose to support brands aligned with their values. Gen X, Millennials, and Gen Z account for 62% of the US population, providing a significant consumer market for financial institutions adopting this model.

Furthermore, a meta-analysis of over 2,000 studies showed a positive correlation between environmental, social, and corporate governance and financial performance in nearly two-thirds of the studies. In contrast, less than 10% showed a negative correlation. This supports the argument that values-based banking can be successful in both ethical and financial terms.

Sustainable practices in banking are also crucial for the planet and future generations. By integrating environmental considerations into their operations, banks can support eco-friendly projects, renewable energy initiatives, and sustainable businesses. This not only helps combat climate change but also builds a more resilient economy by directing capital towards projects better equipped to handle environmental and economic risks.

The time has come for businesses and banks to embrace the triple bottom line of people, planet, and prosperity. Adopting values-based banking is not just an alternative; it is a path towards a brighter, more inclusive, and sustainable economic future for all.