Banks are launching sustainable finance strategies to tap into a growing millennial clientele.
Millennials are expected to be the largest adult population segment by the end of the decade, marking a shift in clientele for banks and financial institutions. In a bid to become more millennial-friendly, banks are not only focusing on online platforms and apps, but also striving to put transparency and honesty at the forefront of their engagement.
“Americans spend $36 billion a day as consumers, making decisions based on cost, convenience and quality,” said Andrei Cherny, co-founder and CEO of American bank Aspiration, in an article for Business Insider. “Now, for the first time, they’ll have an easy way to make spending decisions based on conscience, as well.”
Aspiration has launched a feature on its app that allows users to see the environmental and social impacts of their purchases: The Aspiration Impact Measurement (AIM). AIM rates businesses on how they treat employees and the environment, tallying these up to create a People score, which considers metrics such as salaries and diversity, and a Planet score, which rates factors including greenhouse gas emission and renewable energy use. The AIM then gives companies a rating from 1–100. Customers can use these two ratings to calculate their own Sustainability score, giving them a good indication of how their spending habits impact both people and the environment.
According to a report by Deloitte, almost two-thirds of millennials are not only concerned with the state of the world, but also feel obliged to change something. Banks large and small are taking heed, as millennial consumers seek to use their dollars to create change.
In Stockholm, the Bank of Åland created a tool to calculate a user’s CO2 impact based on their purchases. The Åland Index tracks monthly transactions to work out the weight in carbon footprint emissions resulting from every purchase. And several investment firms have begun to offer sustainable investment options to appeal to millennials, including Fidelity, which launched two sustainable low-cost index funds in May.
Millennials consider technology and online platforms to be an important source of financial advice, with 57% even willing to ditch traditional banks for a better technology platform, according to Deloitte. As previously reported by JWT Intelligence, mobile-only banking can appeal to a younger population. And platforms like Atom Bank, the “UK’s first bank built exclusively for mobile,” even offer customers digital mortgages.
But as new apps enter the banking space, they’re proving able to draw consumers not just with technology, but with a sustainability angle. In September, Grow launched with a promise to “bring high-impact investments to your pocket.” The app-based robo-investor screens for companies with strong environmental sustainability or socially responsible practices, with a Grow Score that conveniently shows just how responsible an investment is.
Millennials demand that financial institutions respect their values and fit in with their connected lives. With the competition now emerging from technology platforms, banks can no longer afford to ignore these values and risk losing a generation of customers.