A bank in Michigan has started a program called Green Deposits to allow business customers to direct their cash reserves to businesses and projects that are supposed to create a positive environmental impact.

Providence, Rhode Island Citizens – which has branches in Michigan and 10 other states – said the Green Deposits solution gives customers the ability to direct deposits to investments in areas such as energy efficiency; renewable energy; green transport; sustainable food, agriculture and forestry; Waste Management; and the reduction of greenhouse gases.

“Recognizing the growing desire of clients for socially responsible investment options, our new green deposit solution provides clients with a sustainable investment vehicle that aligns with citizen engagement to help create a healthy and sustainable future. for all of our stakeholders, â€said Michael Cummins, Executive Vice President and Head of Treasury Solutions at Citizens. “As a financial institution, Citizens recognizes the essential role the bank can play in helping finance a socially responsible future and continues to explore opportunities to support sustainable development. “

Citizens have developed a framework of green deposits to identify eligible activities within the bank’s portfolio and ensure alignment with best practices and standards. The framework was created with support from Sustainalytics, a Morningstar company and a leading provider of environmental, social and governance (ESG) research and data.

Pat Nuzzo, executive vice president, responsible for commercial liquidity management for Citizens Commercial Banking, said the bank has an internal incubation committee that reflected on the idea for Green Deposits based on feedback from clients and with funding from its investment committee.

“We found that one, there was a lot of education that was needed around ESG, but also, clients were keenly interested in including ESG in their business structure, but for the most part customers, especially customers who are at the lower end of the mid-market… they don’t really have the bandwidth or the capacity in-house to really set up their own ESG programs, so they were looking for ways to show their stakeholders their commitment to either environmental and social programs or governance, “he said.” We started to think: how could we, as a bank, help our customers to achieve this? And then we started to think about green deposits.

Nuzzo said the Green Deposits program is designed to invest “stable liquidity of a strategic or more regulatory nature”.

“(Customers) can allocate their deposits, to help them show their commitment to the environment,†he said.

Working with Sustainalytics to develop the project, Nuzzo said citizens realized that most green investment opportunities revolve around green bonds, which carry higher risk and are potentially more laborious for companies to manage, or carbon credits, which can be complicated. understand. Green deposits are a new approach, he said, with only a few other banks having developed a similar model.

“We are managing the portfolio holistically,†Nuzzo said. “We report it to clients in terms of portfolio and investments. Our goal is not to take more deposits than we have loans or program eligible investments. We don’t want it to look or look like a mutual fund, where there are requirements for having to invest a certain amount of proceeds in certain investments.

“For the client, one of the real advantages of this program is that it is a passive investment. They are in a portfolio, they usually have information about the types of investments in the program, but they do not have specific information about the names of individual clients … because they are in fact not linked to any gain or loss. associated with these individual names.

Nuzzo said Citizens’ clients have expressed concerns that if they do not have an ESG program, it could limit their access to capital in the future as more companies, municipalities and governments are starting to require ESG compliance from companies – as well as compliance by their suppliers – before they consider investing in them.

Another element of risk management that Green Deposits can help, Nuzzo said, is branding the company with buyers and potential employees who value ESG in a business.

“It’s the buying decisions, it’s the decisions workers will make about who they’re willing to work that are also impacted by a company’s ESG profile,†he said.

Nuzzo said Citizens has generated a lot of buzz since the program was announced in late July.

“There was a lot of interest, a lot of questions,†he said. “There is still education that needs to be done in the markets. People are worried about it; they just don’t know how to go about establishing a program, and so a lot of what we try to do is help clients educate themselves and make good choices about the programs they can implement.

Citizens said it is committed to reducing its own operational impact on the environment, understanding and managing the risks and opportunities presented by climate change and the resulting regulatory and business changes, and supporting its clients to plan and manage the impact of climate change. To support the renewable energy industry, Citizens provides equity investments through Citizens Asset Finance and has helped finance eight US wind farm projects since mid-2015, with investments totaling approximately $ 403 million at the end. from 2020.

Citizens has also adopted targets to reduce its greenhouse gas emissions by 30% by 2025 and 50% by 2035, based on its 2016 benchmark, to support international targets to limit the rise in global temperature. These goals align with the Paris Agreement, which aims to limit the average increase in global temperature to well below 2 degrees Celsius above pre-industrial levels.

More information on citizens’ green deposits can be found at Citizensbank.com/greendeposits.