Can big banks ever be sustainable? The numerous government loans funneled to the largest banks in the U.S. indicate that entities like J.P. Morgan Chase and Bank of America might not be completely economically sustainable, but they are at least making strides in other types of sustainability. Author and investment adviser R. Paul Herman compares these two banks in the new book The HIP Investor. Below, we do the same.
J.P. Morgan Chase deserves credit right off the bat for transparency. The company offers a sustainability case study (courtesy of Accenture) on its Web site, as well as a comprehensive environmental policy, multiple CSR reports, and a list of environmental initiatives. J.P. Morgan also subscribes to "The Equator Principles"— a framework for evaluating risk in social and environmental areas.
But J.P. Morgan still has some work to do. The company was recently given a grade of F on the Rainforest Action Network's Mountaintop Removal Report Card for funding mountaintop removal in coal-mining initiatives. The bank has said, however, that it will offer up a statement on mountaintop removal coal mining later this year. J.P. Morgan might also consider lowering its CEO's paycheck, which is currently 441 times that of the average employee in the company. In such uncertain economic times, a little modesty goes a long way.
Bank of America, on the other hand, gets points for paying its CEO 173 times what the average employee makes—significantly less than J.P. Morgan's CEO-to-employee ratio. And the bank has a decent mountaintop removal policy, explaining (PDF file) on its Web site that "Bank of America is particularly concerned about surface mining conducted through mountain top removal in locations such as central Appalachia. We therefore will phase out financing of companies whose predominant method of extracting coal is through mountain top removal." The bank also details numerous environmental initiatives and commitments on its Web site—the largest being a $20 billion ten-year plan initiated in 2007 to increase environmentally sustainable business practices.
But like J.P Morgan, Bank of America isn't perfect. The company doesn't offer comprensive CSR, sustainability or social responsibility reporting—it released a 2007/2008 sustainability report, but hasn't yet released one for 2009. And while it claims to adhere to The Equator Principles, BoA was accused of greenwashing in 2008 for not offering significant capital to these principles.
While both J.P. Morgan Chase and Bank of America have shortcomings, both banks are significantly improving on the sustainability front. Until one of these banks does something to really top the other, we have to declare a tie in this battle for sustainable domination (note: this is FastCompany.com's opinion, not The HIP Investor's).
|J.P. Morgan Chase||Bank of America|
|Overview||Over 5,000 bank branches in the U.S.; $112.2 billion revenue (2008); 220,255 employees||Over 6,000 locations in the U.S.; $124.1 billion revenue (2008); 283,000 employees|
|Product||In 2007 and 2008, Chase helped prevent about 330,000 foreclosures, primarily by modifying loan terms; seeking to boost to 650,000 families by the end of 2010||The Brighter Planet Visa card earns EarthSmart™ reward points where every $1,000 spent will fund an estimated ton of carbon offsets – since the card was launched in Nov. 2007, cardholders have offset over 35 million pounds of CO2|
|21 of 25: Established Office of Corporate Responsibility in 2007 to coordinate, align, and articulate positive-impact and socially responsible activities across the firm, led by senior managers||11 of 25: Established Environmental Council in 2007, composed of senior bank leaders reporting to the CEO; new policies and procedures, aims to help customers take action against global climate change|
|Customer satisfaction is 73%; Employee retention data not publicly available||6%|| Customer satisfaction is 73%; company retains nearly 90% of all its
|Part-time employees who work 20 hours per week are eligible to make Roth 401(k) contributions after 90 days of service; CEO compensation is 441 times average employee||10%||Established qualified retirement plans covering substantially all full-time and certain part-time employees; CEO compensation is 173 times average employee||13%|
|Bought 127,000 MWh of 2007 vintage Green-e certified wind RECs, representing approx. 5% of U.S. electricity use; 9.4 metric tons of CO2e emitted per $1MM in revenue in 2008||14%||12 metric tons of CO2e emitted per $1MM in revenue in 2008||8%|
|48% women managers; Over $1 billion spent with diverse suppliers, a rapid increase over the past years||17%||50% women managers; numerous diversity awards but no quantifiable diversity spending||15%|
|Comprehensive HIP reporting; spent $48.04 per $1MM in revenue on lobbying activities||12%||No HIP reporting; Spent $39.36 per $1MM in revenue on lobbying activities||6%|
return on equity (2008)
+0.8% annualized total return, including reinvested dividends (6/2004–6/2009)
–3.7% annualized total return, including reinvested dividends (6/2006–6/2009)
return on equity (2008)
–1.7% annualized total return, including reinvested dividends (6/2004–6/2009)
–17.9% annualized total return, including reinvested dividends (6/2006–6/2009)
Table excerpted from The HIP Investor: Make Bigger Profits by Building a Better World by R. Paul Herman Copyright (c) Published by John Wiley & Sons. Used with permission.