Wells Fargo Deploys CSR Multiplier Effect

In the first of a three part series on the state of CSR in the banking industry, Wells Fargo is a great example of using a core product to do good. Beyond that, Wells Fargo's CSR has a multiplier effect that creates more CSR by financing new sustainable business ventures. In 2005, Wells Fargo put out a brief on a few basic CSR principles, which they have boomed through five years later. Wells Fargo has now financed over $6 billion in specifically green projects, representing about half of its total investment portfolio.

Size matters, but so does intent

Wells Fargo is a small bank, even after its 2009 acquisition of Wachovia during the financial crisis. With only $1.25 trillion in assets on its books, Wells Fargo is essentially a community bank despite its now national reach. JP Morgan, Goldman and other major financiers certainly have far more assets incidentally in green ventures than Wells Fargo, however it's Wells Fargo's intentional pursuit of green business that makes it adds CSR value. Where other financiers that invested in green business did so with a profit motive, Wells Fargo has made a commitment to specifically finance green businesses as a function of its corporate social responsibility. This 'tone from the top' influences th type of projects Wells Fargo has invested in, and has greatly influenced its holdings.

Local impact

Wells Fargo's small size -relative to the notorious"too big to fail" institutions- also means that it is financing more small businesses. We hear, at nauseum, how small businesses are the growth engine of the economy. Yet, small businesses are also most at risk for bankruptcy due to lack of sufficient financing. Thus Wells Fargo plays a crucial financing role filling the cash hole in small scale green ventures. In this sense, they are like the microfinance institution- of big banking.

Practicing What They Preach

Perhaps to encourage the success of their investment, Wells Fargo is one of the top financial sector consumers of green energy. Wells Fargo's top to bottom commitment to cleantech is both socially responsible, good for business, and completely logical as a package of policies.

Environmental Leader Report off the mark

The Environmental Leader criticized Wells Fargo because, of their green business lending, the proportion going to green building has been in decline relative to other types of green business. This does not make sense as a criticism; at not point did Wells Fargo promise to be the top financier of green building, but of green business. As a bank, it's their perogative and fiscal duty to choose the best projects. If that's not green building, for whatever reason, that is of little to no consequence and does nothing to reduce the impact of the good and CSR impact Wells Fargo is making. Indeed, Wells' heavier investment in green energy points to the higher returns anticipated from this sector.

Wells Fargo: Keep going!

In total, Wells Fargo's green bent is pleasing. I reiterate the relatively small size of this bank, but also their communicated intent to be financing these projects because they are interested in sustainability, in addition to return.