Where Does Your Cash Sleep at Night?

21st in a series of excerpts from the book The HIP Investor (John Wiley & Sons, 2010). See other articles in the series here.

Do you know where your garbage ends up, what the source of your water is, or how your power is produced? Most of us do not. Just like most of us do not even know where the cash in our banks or money markets go. Yet, these are all integral components of the way we live our life, and the impact we have on the lives of those around us.

So, where does your cash sleep at night? And what happens to it during the day? A HIP investor investigates their bank or credit union: how it functions, where customer funds are loaned or invested, how it can benefit you and your community as a whole. Typically, a bank uses your deposits to make loans to other customers at a higher rate, which is how it can pay you to “borrow” your money. A money-market fund invests in low-risk securities ranging from (formerly “risk-free”) U.S. Treasuries, to lines of credit, to top-notch corporations that are financing their payroll needs and inventories.

But how, exactly, can your cash seek to be more HIP?

The HIP approach embraces full transparency, and the best way to learn what happens to your cash is to demand transparency from the banks that hold your money. Ask questions like: where does my money sleep at night? Does the bank or credit union advance organizations that have a positive impact – or a net negative one? Of course, HIP investors can use a HIP Scorecard to align with the goals of Human Impact + Profit.

Where can you park your cash to be more HIP? Explore these options for your portfolio, as they tend to be transparent and focused on creating positive impact:

New Resource Bank, invests funds in sustainable companies, helping to expand the working capital for eco-sensitive and organic products, as well as funding renewable energy and energy efficiency loans and working capital. CEO Vince Siciliano has even instituted a Customer Scorecard as part of the loan evaluation process.

One Pacific Coast Bank, with operations in California, Oregon and Washington, seeks a positive “triple-bottom-line” of financial, social, and environmental goals while meeting the needs of its communities. As a community development financial institution (CDFI), the bank integrates financial literacy, technical assistance, and business education through support from the One PacificCoast Foundation and the recently merged ShorePacific Bank.

As a local customer-owned community bank that encourages a “buy local” approach, Home Savings Bank in Dane County, Wisconsin is committed to being a positive influence on the local economy and the environment. Innovative, they also work with microfinance funds like Envest in 11 countries in Latin America. This bank also offers green financial products, has solar-powered offices, and is the first LEED certified bank building in Wisconsin.

Green Choice Bank, newly opening in Chicago is also focused on being “green” both financially and environmentally, with recycled plastic for debit cards, and seeking a paper-less loan process.

Self-Help Credit Union in Durham, North Carolina, also provides deposit accounts to customers nationwide, which are then used to fund the positive impact of small businesses and nonprofits. Self-Help seeks out opportunities that benefit women, ethnic minorities, rural residents, and low-wealth families. Deposits earn a market rate of return, home buyers and small businesses have accessed more than $5 billion in financings, including charter schools, daycare centers and non-profits. Similarly, many credit unions have a community-focused mission and local focus.

Wainwright Bank, based in Boston was a publicly listed bank seeking high impact for its customers with $1 billion in assets in 2009, and offered reduced-rate equity loans through its Green Loan Fund. Customers with these loans purchased solar panels and wind farms, installed energy-efficient windows and “green” roofs that better manage overall energy usage. More than $700 million in loans have generated positive impact so far. Wainwright is now owned by Eastern Bank, which has won a JD Power award for customer satisfaction.

Big banks like JP Morgan (NYSE: JPM), Wells Fargo (NYSE: WFC), Bank of America (NYSE: BAC), and others talk about their sustainability initiatives, create loans for clean technology and renewable energy and even LEED-certify some of their operations. However, these are still smaller operations inside their larger business, which can include funding mountain-top removal, fossil fuel expansion, and products that can be risky or dangerous for low-income wealth-building. Investigate the details of what your bank says on its corporate website, and what it does by seeking out third-party ratings and rankings – as a HIP investor, as you learned in earlier features, find out about the products and services, the operations and supply chain, and the overall management practices. In 2010, we compared Bank of America and JP Morgan head-to-head in this sustainability faceoff excerpted from the HIP book and published in Fast Company online.

HIP also recently published an article explaining the different risk factors of larger traditional banks vs. sustainable banks titled ‘Too Big to Fail’ Banks Less Profitable, More Risky than Sustainability-focused Banks.  This article cites GABV’s recent report following the banking crisis to show where Human Impact and sustainability meet Profitability.

A HIP investor knows that “your money can be your voice,” and it’s important to ask your bank or money-market provider how the funds generate positive human impact. If not sufficient, then consider adding a new bank or credit union – or switching altogether. You can likely make the same—or potentially better—interest on your money, and help build a better future and community at the same time.

Always research the strength of the firm that holds your funds as well – BankRate.com provides a “safe and sound” tool to explore the financials and liquidity of banks, which means many smaller banks may not rate as high as larger banks with more assets, explained HERE.

In our next feature, we will profile how to diversify your portfolio with income-generating assets like municipal bonds, microfinance, bonds of HIP corporations, and innovative peer-to-peer loans.

To navigate this series, please use this table of contents.


HIP Investor supports Spring of Sustainability.  For three months, the Spring of Sustainability will feature 100 “stars” of sustainability, from Jane Goodall to Bill McKibben to Van Jones, in free interactive teleseminars throughout the spring of 2012. Live events will also be held in cities across the globe.


R. Paul Herman is CEO and founder of HIP Investor Inc. Herman is the author of “The HIP Investor: Make Bigger Profits by Building a Better World,”  published by John Wiley & Sons in 2010. Herman is a registered representative of HIP Investor Inc., an investment adviser registered in California, Washington and Illinois.

NOTE: This feature, excerpted and adapted from the HIP book, is not an offer of securities nor a solicitation. The information presented is for information and education purposes, and is not an investment recommendation. Past performance is not indicative of future results. All investing risks losing your principal. The author may invest in the companies mentioned above, and several are included in the HIP 100 Index portfolio. Details and full disclosures are at www.HIPinvestor.com

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R. Paul Herman* created the HIP (Human Impact + Profit) methodology for entrepreneurs, companies and investors worldwide to realize how quantifiable sustainability can drive financial performance.Herman advises investors, designs HIP portfolios, and manages the HIP 100 Index -- all applying “The HIPScorecard” featured in his 2010 book (The HIP Investor; Make Bigger Profits by Building a Better World; John Wiley & Sons), Fast Company magazine, business school curricula, and at www.HIPinvestor.com.Herman’s financial acumen was honed at the Wharton School and McKinsey & Co., and he accelerated social entrepreneurs at Ashoka.org and Omidyar Network. Herman has advised leading corporations (including Walmart and NIKE), family offices and foundations on how to be more HIP. His insights have been quoted in the Wall Street Journal, The New York Times, Fortune, Forbes, BusinessWeek, and on CNN, Reuters, Morningstar.com and CNBC.* R. Paul Herman is CEO and a registered representative of HIP Investor Inc., an investment adviser registered in California, Washington, and Illinois.

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