Environmental sustainability as commoditizition insurance.

Wow, that title is a mouthful.

I’ve been thinking about Bank of America a bit lately. As most readers of an FI blog will undoubtedly know, they are making a $20 Billion investment in environmental sustainability over the next 10 years. The money will go to many different things: A big chunk of the money will go to lending to businesses looking to create a more sustainable enterprise. They will also take a more environmentally friendly approach to their own business operations. And lastly, and to me most interestingly, they are rolling out products that have an environmental focus like a WorldPoints Rewards for the Environment (credit card), The Green Mortgage Program and Environmental Home Equity Program.

Sound familiar? It sounds a lot like the things that Vancity, the company I am contracting at does. They have a Clean Air Auto Loan, a Climate Change Mortgage, a Bright Ideas Home Reno Loan and an enviroVISA. Why would BofA do this? I am going to assume that this is a genuine move. I can’t imagine that a company would commit $20 Billion into something they didn’t believe in from both a values and business point of view.

In a vertical where it’s nearly impossible to differentiate yourself based on products, this is a very smart move. If accounts, credit cards, mortgages etc are simply commodities at this point, no different at bank A than at Bank B, then BofA knows that it’s not going to keep or grow its market share by staying the course. It has to stand for something and have a brand that is different from the rest of the players on the marketplace. It will become the green bank, and make a big enough investment into that aspect of its business, that it can truly define its place in the market based, in part, on that.

It must have looked into the future and decided that the environment was going to become a critical issue for consumers over the next ten years and they wanted to get out front early and lead the way. It’s gutsy and brave at this point when so many Americans are still tuned out on the issue. It also has interesting repercussions for a company like Vancity. Granted, Vancity’s a regional player in a different country, but if, say, TD Canada Trust follows suit and does something similar, what would make Vancity unique in the eyes of the consumer? I had never guessed that a big company could compete with a credit union on these types of initiatives.

Now, to be fair, Vancity does all sorts of things around the underbanked and underserved and helping those in poverty start to build asset. But from a consumer point of view, they’re primarily known for their green initiatives. How long will that perception of leading the “green” way last, I wonder. It’s going to be a challenge for the business, but hopefully one that is very good for the environment. It’s especially a challenge that Credit Unions are going to have to start dealing with sooner rather than later.