The city of Seattle severed ties with Wells Fargo bank earlier this month and other cities, including Davis, California are following suit. The money from those cities may be a drop in the bucket to the giant financial institution, but the divestment highlights a growing trend in the finance industry.
Seattle pulled more than $3 billion out of Wells Fargo. That might not sound like much to a bank with more than $1 trillion in deposits last year. But Natasha Lamb, a managing partner with the wealth management firm Arjuna Captial, says customers begin to lose trust in a company if it isn’t doing a good job of managing social, environmental and governance issues.
In the case of Wells Fargo, the fake account scandal that broke last year is already hitting the bank’s bottom line.
"Those account openings fell over 40 percent in the fourth quarter, so this is a material impact on the bank. And if you have retail customers and cities looking elsewhere, then you have a real problem," said Lamb.
And with the city of Seattle taking a leadership position because of the Dakota Access Pipeline, the people of Seattle may decide to take similar steps. That’s part of a growing trend that Lamb sees with her clients.
"We've seen a huge growth of individuals and institutions that are interested in investing this way, and certainly we've seen a lot of people interested after the presidential election. I think there's been a big call to action for people to connect their money with their values," said Lamb.
Seattle will need to find a new bank, one that meshes with the city’s ideals. That could be tricky with the banking consolidation that’s gone on over the last decade.
Experts like Lamb say smaller institutions may be the way to go because they generally have fewer complexities. But there’s another option — the Washington State Legislature is looking at a bill that would create a public, taxpayer-owned bank.