OneWorld.net (U.S.)

OneWorld.net note: Few banking programs seek to incite social change, but Chittenden, Vermont's largest bank, is using $92 million of customer deposits to invest in local communities and socially responsible businesses.

• LACE's Grand Opening, Jun. 10, 2007: The Local Agricultural Community Exchange, or LACE, worked with Chittenden bank to develop a socially responsible business plan. © Fran 53 (flickr)The Socially Responsible Banking Program was launched in the late 1980s by the Vermont National Bank. When Chittenden purchased the National Bank they simply continued with the Program. As of March 2008, Chittenden has over 12,000 accounts in the Program, which translate into almost $100,000 in loans for socially responsible businesses.
• Chittenden is one of many participants in Changemakers.net's Mosaic of Solutions. The Mosaic of Solutions was developed to highlight innovative programs focused on very particular development issues and show social activists how their individual efforts fit into a larger movement. Chittenden bank is placed within the mosaic "Banking on Social Change," which seeks to increase the participation of disadvantaged peoples and enterprises in the formal economy.
• Chittenden is also a member of Vermont Businesses for Social Responsibilty (VBSR), an organization that strives to foster a socially responsible business ethic throughout Vermont. In May, VBSR lobbied for the Vermont Energy Bill, stating that "investment in energy solutions today will return significant public returns for years to come." The bill, which proposes to increase taxes on a nuclear energy company operating in the state, was vetoed in June.

Imagine: A Bank Putting Your Money Where Your Heart Is

From: Changemakers.net

How does your bank use your money after deposit it? Most of us have no idea. 

Customers of Chittenden Bank, the largest bank in the state of Vermont, can choose to put their deposits in a $92 million Socially Responsible Banking fund that invests in strengthening their communities in areas that matter such as education, affordable housing, and sustainable agriculture.

It’s unusual for a bank this size to integrate social goals into everyday transactions

While some credit unions and small privately-held banks in the U.S. have community development missions, Chittenden stands out as one of very few publicly-held, commercial banks that have such a large fund where depositors can invest in their communities, said Rian Fried, member of the advisory board of Chittenden’s Socially Responsible Banking (SRB) program and co-founder of Clean Yield, a portfolio management company for social investors. Although most large regional or national banks have charitable programs, it’s unusual for a bank this size to integrate social goals into everyday transactions, he said.

The Socially Responsible Banking program was started in the late 1980s by the Vermont National Bank that subsequently was bought by Chittenden, said Gayle McKinnon-Alexander, a business development officer with the SRB program. Originally, depositors accepted a small interest rate cut in order to participate in a program that lent money to community-minded businesses and organizations at a slightly reduced rate.

The rate differential has been discontinued over the past few years as interest rates have dropped, but the bank continues to make loans from the SRB fund to businesses that are helping the community. The bank can offer these borrowers more flexible loan terms, on a case-by-case basis, such as such allowing a longer repayment schedule.

The Grafton Village Cheese Company in Brattleboro, Vermont has used financing from the SRB Fund to expand into a new production facility and a 2,500-square-foot store that sells wine, gourmet food, and specialty artisanal cheeses from local Vermont producers. The expansion is helping the local economy by adding 35 new jobs and supports local dairy farmers, said Melissa Gulloti, a spokeswoman of the Windham Foundation, a non-profit foundation that operates Grafton Cheese.

Expansion of the Grafton Village Cheese Company helps the local economy, supporting local dairy farmers

Chittenden has also loaned funds to the Local Agricultural Community Exchange of Barre VT during the past year, another project that produces and promotes local food production. It operates a local foods market and a café, plus educational programs for the community about how to prepare sustainable foods.

Local resident can share, trade and sell locally prepared foods at the LACE market in downtown Barre and learn from one another in workshops, discussion groups, lectures. They can participate in hands-on cooking and preparation of local foods in LACE's community kitchen, and become vendors in the LACE Gallery of all Vermont-made crafts and goods.

Musician Jackson Browne and Vermont Senator Patrick Leahy visit the LACE market at last year's grand opening

Participation in the program has been strong, said McKinnon-Alexander. As of March 2008, there were more than 12,200 accounts in the SRB program totaling nearly $92 million, according to Chittenden. That’s about 10 percent of the bank’s entire portfolio, she said.

Although successful, Chittenden’s program is hard to replicate, especially for large, national banks, because socially responsible programs must reflect the priorities of communities which vary by geographical regions, Fried said. But interest in social investing is increasing as baby boomers look for a way to give back to society, said Hank Boerner, CEO of the Governance and Accountability Institute that provides research and advice to corporate and nonprofit businesses. It can make sense to work with companies that have a social mission, and are less likely to pollute or be tied up in litigation, he said.

At a time when the public may be losing confidence in banks due to financial mismanagement and a looming liquidity crisis, it is helps Chittenden to have a program that builds public trust. “It’s a very forward thinking bank that does very well,” said Fried. “And part of the reason it does very well is the SRB fund.”

Cheesey goodness in Grafton: investing in local enterprise builds public trust

To read about other socially responsible enterprises from Changemakers.net, visit their Mosaic of Solutions for Banking on Social Change.