How Sustainable Are Credit Unions?

Credit unions are great! Not-for-profit organisations, run by the people, for the people. A political slogan we’ve all come to know very well, except in this case, it’s actually true. As a non-profit organisation, we’ve come to associate credit unions with all things nice and cuddly, identifying them as the teddy bear of the banking world. However, unlike a good teddy bear, credit unions tend to duck their responsibilities when it comes to the environment, sustainability and hugging (optional).  

Credit unions (CUs), just like banks, use your money to fund ‘activities’. Finding out what these ‘activities’ actually are is all part of building a better and greener future. Here at Bank.Green, we wanted to know if CUs are taking an active role in funding, or fighting, the fossil fuel industry. Are you ready for the big reveal? 

Unfortunately, credit unions are unwilling to stand up against the fossil fuels industry. While the credit unions as a sector largely do not take a position on fossil fuels, individual credit unions do have a great deal of autonomy in what they choose to do, such as funding or fighting the climate crisis. 

So, the deeper question remains, just how sustainable are credit unions?

Credit unions and sustainability 

In this article, we’re going to look at CUs in the United Kingdom, USA, and Ireland. As a rule, you’re going to find a great deal of individuality when it comes to credit unions, although they’d certainly all like to imagine themselves as community banks. 

Credit unions tend to suffer from a distinct case of ‘it’s not our problem’ when it comes to the environment.  In Britain and Ireland, CUs are pretty unlikely to lend your money to the fossil-fuel industry, simply due to their small size. Petrochemical companies rarely require loans from £10,000 to £20,000, putting them out of the reach of your local credit union.  

This is in direct contrast to the Americans, where credit unions can grow to a much larger size. In the United States, credit unions can rival or even surpass the size of many large banks. Funding the local coal mine or oilfield wouldn’t be out of the question in this case, and some choose to do so. But other US credit unions don't – not due to any written policy, but because they are too small to do so. This brings us back to our original point about credit union individuality and inaction. 

Here at Bank.Green , we believe that inaction isn’t quite good enough. Simply being too small to lend to the fossil-fuel industry doesn’t mean you’re protecting the environment. It means you’re ignoring it. While some CU’s can really shine when it comes to sustainability, the vast majority don’t seem to have considered it. What exactly aren’t they doing? 

What should credit unions be doing? 

Here at Bank.Green, we believe that inaction isn’t quite good enough. Simply being too small to lend to the fossil-fuel industry doesn’t mean they’re protecting the environment. It means they’re ignoring it.  While some CU’s can really shine when it comes to sustainability, the vast majority don’t seem to have considered it. What exactly aren’t they doing? 

• Committing to a serious green policy of lending and funding 
• Creating green-funding products to incentivise renewable and sustainable projects in the community. 
• Openly stating their commitment to not lend to the fossil-fuel industry. 
• Measuring their emissions and state their plans to reduce them. 

Some people might say that we’re expecting too much from our community institutions. But this is our money. Just like with the bigger banks, we the ‘People’ are trusting them to do the right thing with our finances. Not burning down the planet isn’t too much to ask, is it?  

Credit unions are supposed to be run for the good of the people and the community, not to actively assist in their destruction.  

With that aim in mind, let’s take a closer look at what credit unions are doing in each of these three countries. 

Ireland 

Credit unions in Ireland were voted the number one most trusted financial institution in 2021. In 2022, they were also the only organisation to receive the ‘Excellence’ rating in the ‘Ireland Sustainability RepTrak Index’, which, we understand, is quite the title.  It’s worth noting that this report doesn’t mean CUs are sustainable, but rather just that people think they are. Financial institutions tend to bandy about the word ‘sustainable’ a lot, so it’s important to understand the context. In the context of this report, environmental concerns consisted 17% of each participants ranking. In 2023, credit unions came 3rd overall in this index. 

This is great news, for a teddy bear. What all of these ‘indexes’ and reports actually gather, are opinions.  What are Irish credit unions actually doing to support the environment? 

When it comes to credit unions, we do have to make some generalisations.  

While it doesn’t appear they’ve committed to anything specific, they have at least outlined a framework for reducing their environmental impact. On an individual basis, many credit unions get involved with community projects to plant trees and fund green businesses. If you’re interested in your local branch, call in or have a good snoop through their social media to see what they’re up to. Or, if you’re feeling particularly suspicious, you can always check out their annual filings and reports. It’s possible you might find even find some actual answers in them. 

Overall, CUs in Ireland are rated very highly by the public for pretty much everything. While some individual credit unions have begun to build a framework for sustainable banking activities, there’s very little movement on behalf of the industry as a whole. When environmental actions are considered, it seems to be in the context of a larger, financial ‘sustainability’ plan. 

Let’s take a look across the water. 

United Kingdom 

Take care not to mix up your building societies and credit unions in the UK. While similar, a building society puts a lot of focus on the mortgage as the cornerstone of its business. As with credit unions in Ireland, CUs in the UK are practically independent entities when it comes to climate change. It’s up to each individual CU to decide what they want to do for the environment. 

The vast majority of CU’s seem to ignore the problem, with no plans in place to counteract climate change. Green loans, such as at Salford CU, are being introduced in many areas, but this always depends on the credit union itself. 

The Association of British Credit Unions itself seems to have very little to say on the matter. ‘Ignorance is bliss’ seem to be the key words when it comes to CUs and climate change in the UK. Very little appears to be happening at a high level, while individual CUs choose their own directions. 

Depressing, but not exceptional. Onwards to the Americas. 

USA 

CUs in America share many of the same passive traits when it comes to the environment that CUs in the UK and Ireland do. There will always be outliers, such as the Clean Energy CU, but the general tone remains the same.  Clean Energy CU is a credit union based around positive climate action, which is something we’d love to see more widespread. With ‘clean energy’ loan programmes and loans for solar and home improvement, Clean Energy sets a standard for green leaders everywhere. They even offer loans for geothermal energy, something quite rare in the UK and Ireland 

What we can see in the USA is a lot more attention being given by CUs to the climate crisis. This study by Ceres and Filene Research Institute serves to highlight the effects of the climate crisis to CU members and management. Awareness is always a good thing, and we’d certainly love to see more of that across the UK and Ireland. 

On the opposite end from this, Texas Dow Employees Credit Union, a very large credit union, has just ‘acquired’, as they say in finance terms, a bank in Louisiana. Why, you might ask, does a credit union need to buy a bank? It’s simple! They wanted to use more of your money to fund oil and gas exploration. 

All of that said, the sheer scale and diversity of the USA means there’s a lot of individual CU’s taking positive action to make their banking sustainable. On a larger level, the NCUA are moving to put regulations in place, but much of this will depend on politicians and whether or not they want to see changes implemented. You can follow the progress here.  

How sustainable are credit unions? 

Well, that depends on the credit union in question. Pockets of excellence in a sea of mediocrity, describes the credit union landscape perfectly. We want dedicated green lending products, emissions, and renewable targets and easily accessible data on everything. Too many credit unions are burying their heads in the sand when it comes to the climate crisis. 

Some Credit unions, especially the bigger ones, do still fund the fossil-fuel industry. Whether it’s a little or a lot, we think it’s important that you know exactly how and where your money is being spent. Our bank-rating, or in this case, credit union rating system shows you exactly how sustainable your credit union is, giving you that lovely, guilt free-banking experience. 

Move your money today, and make our future just that little bit greener.