The Green Finance Podcast Ep. 1: How banks can encourage sustainability with Aspiration CEO Andrei Cherny

Hello everyone, welcome to the first episode of Tearsheet’s brand new Green Finance Podcast, hosted by yours truly, senior reporter Iulia Ciutina. I’m very excited to be launching this podcast – green finance is all about the role of money and finance in our journey towards sustainability, an issue growing in importance on the corporate agenda. This is why I want to have conversations with key people in the green finance industry to help us make sense of the environmental impact of money.

This podcast will be all about what the finance industry is doing to address climate change – we know business as usual isn’t sustainable, so we are essentially in the middle of a transition towards reaching net zero. But that's not an easy thing to do – it involves collaborations between many institutions, companies and people – so let’s talk about how to get there.

In light of this, my very first guest on this podcast is Aspiration CEO Andrei Cherny. Aspiration is a fintech that wants to help customers use their deposits for sustainable investments, and gives them the option to offset their carbon footprint – a fundamentally different strategy from traditional banks.

The idea is to bring sustainability into people’s day-to-day spending and saving – so instead of putting your money in a large traditional bank which then likely uses it to fund oil and gas projects, Aspiration vows to keep your deposits fossil fuel-free.

It also allows people to see the carbon footprint of their spending, providing the option to offset this through planting trees.

Andrei started his career in public policy, and was a political advisor for Al Gore when he ran for president back in 2000. In 2013, he co-founded Aspiration, looking to help more people use their money for good.

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The following excerpts were edited for clarity.

Tell us a little bit about aspiration and the journey to where it is today.

Andrei Cherny: We set out to build Aspiration with the idea of how to bring actionable sustainability to people in their everyday lives. We're in a place right now in history where most people want to do something about climate change, but most people don't know where to start. And so we started Aspiration, realizing that so many people were thinking about how to integrate sustainable action into their daily decisions as consumers, be it in the grocery store, buying clothes, buying coffee, and that there was an enormous need for people to be able to bring sustainability into their daily financial life as well. That's what we set out to do, and along the way really see ourselves as pioneering this category around sustainability focused consumer financial products.

What's the demand like for this type of green banking alternative to traditional options?

Andrei Cherny: We've seen enormous growth as more and more people think about climate change, and more and more people thinking about sustainability in their daily lives. There's about a third of the population that maybe is more financial optimizers, but there's another third that are conscious consumers, and what they're looking for is the best in class financial product, but also one that realizes that the decisions we make about money are inherently moral decisions about where we're going to save and where we're going to spend. That has really driven Aspiration’s growth - we now have over 7 million members in the US, as we call them, and more joining us every day as they want to integrate, as we say, both doing well and doing good together.

Are you seeing any kind of demographic skew within your members or customers?

Andrei Cherny: We definitely see them tending to be younger - most of our customers are 40 and below. Interestingly, other than that age skew, it really looks like the population at large. In the US, it shares the same economic skew as the country overall in terms of income. Geographically, 96% of our customers live outside of Los Angeles, New York City, in the Bay Area, really spread all over the country. About 50/50 are male/female, maybe a slight skew towards female, but pretty close. It really is more of this psychographic overlay of conscious consumers looking to integrate climate action into their daily spending and saving.

What has been your go to market strategy towards these types of consumers?

Andrei Cherny: Well, we started with the centerpiece of their financial life – their day to day spending and saving. We started with what we first called our Aspiration Summit checking account, and then we replaced that in 2019 with our Aspiration spend and save account. It’s really understanding that people are coming to realize that when they're depositing money into one of the big banks out there, that money's not sitting in the back of a vault somewhere. The biggest banks in the world spend more in terms of financing fossil fuel exploration in a day than a company like Exxon Mobil will in a year, and they're using our money to do so. And so we’re helping people see how to move their savings to be sustainable, and also their spending. 

In 2017, we launched something called the Aspiration Impact Measurement, which allows you to see your own personal sustainability score based on where you're spending your money on, and to see the scores of the places where you are making purchases. It helps you be a conscious consumer. Think of it like a Fitbit for sustainability and a daily score that shows you how you're doing and empowers you to decide if you want to go to McDonald's or Burger King, Target or WalMart, go to CVS or Walgreens by showing you how those businesses treat their employees and how they treat the environment and then leveling up into your own personal aim score. That's been really the centerpiece of what we brought to market. 

Last year in 2021, we launched Aspiration Zero, which is the first credit card built around fighting the climate crisis. In fact, that really may be one of the only products in the world that allows you to easily offset your entire carbon footprint just by using it once a day, by neutralizing that footprint with the planting of trees. That's been an enormously positive new addition, along with that banking along with investing in the other pieces that we've offered.

The money we put into our bank accounts contribute towards something, it's a type of economic decision that has influence. Aspiration voices commitment to clean money, and it's been a huge differentiator from traditional banks. But how can a consumer know where a new bank like Aspiration directs its capital?

Andrei Cherny: It's hard to know. More and more people are realizing that that's a question that they need to ask. With Aspiration, it's front and center – we tell people what we are going to do and what we're not going to do with their money. There's reports out there that people can look at, like those from the Rainforest Action Network that show where at least traditional banks are lending their own customers deposits and what they're using to finance with those deposits. But the truth is that it is murkier than it should be. And that's why Aspiration has really been leading around saying your deposits will be fossil fuel free as well as firearm free, and, and so on.

Fossil fuel financing by big banks in the US has been quite the conversation in recent weeks – we've seen activist investors trying to push forward shareholder actions to vote to stop fossil fuel financing by the end of the year. What's your opinion on this? Do you think activists are asking for too much? Or is management not doing enough?

Andrei Cherny: I think we're facing the greatest challenge and crisis ever to face humanity. Yes, it's an enormous task to try to speed that transition from the fossil fuel economy, it's incredibly difficult to do. But what is the alternative? The alternative is to continue to drive this climate crisis that is feeding on itself, that is showing negative feedback loops, as you're seeing the dramatic impacts that it’s causing, and will be causing over the next few years.

We need to make the largest fastest shift in human behavior in history, and we don't have until 2050 to do it, we don't have until 2040 to do it. We have a few years and if we get that wrong, and if we don't have enormous demand, and if we don't make enormous change, the devastating impacts will be felt for generations for centuries. It'll change the very nature of how we all live and of the world we live in and leave behind for all the future generations of humanity. 

So it is a lot to ask, but not in the context of the need to have a very fast and very large shift in how we all do business individually, in terms of what our governments do, and yes, in terms of what our money does at any of our banks.

What are the mechanisms that allow a bank like Aspiration to integrate carbon offsetting?

Andrei Cherny: Carbon offsetting really needs to be seen as just a piece of the puzzle. We can’t continue doing what we've been doing, and then provide offsets to alleviate that guilt or that impact. We need to change our ways of doing things. 

At Aspiration, what that means is, first of all, we're helping people reduce their climate footprint. By moving their deposits to be fossil fuel free, we're helping them shop sustainably through our Aspiration Impact Measurement. Similar to what companies need to do, we should start with reducing our carbon footprint, and then we need to mitigate what we can't fully reduce, and that does involve ways to soak carbon out of the atmosphere. 

One of the things that we launched a few years ago is something called plant your change, that allows our customers to plant a tree with every purchase they make by rounding up that purchase to the nearest dollar. And last year alone, our customers funded the planting of 75 million trees, which is probably the largest private sector tree planting endeavor in the world. That's as many trees as there are in Central Park, planted every three hours. 

We also have something called our planet protection feature of our Aspiration Plus card that automatically purchases carbon credits to offset the driving that people do so that every mile that they drive in their car is offset. But again, that doesn't mean you should go out and drive as big of a gas guzzler as you can for as many miles as you want – we need to start by thinking about how to act responsibly and then take these extra steps as well.

In the US, there's so much encouragement of spending and consumption – how much should we rely on offsetting this type of a footprint? What kind of role should carbon offsets play in our financial life? 

Andrei Cherny: I think we should think about it secondly - I think we should start by thinking about what we can reduce, and how we can make our footprint and impact smaller or as small as it can be, and then think about what we can do to make up for that.

There have been many debates around reforestation projects and emphasis on trees being planted with little afterthought about how they grow, as well as the impact these projects have on local communities. How do you choose reforestation partners in this context?

Andrei Cherny: You're absolutely right, looking at anything that a company like ours does, and especially in an area like this, you can do it the right way and you can do it the wrong way. For us, as a company that's really focused on building a business around climate impact, we want to make sure that we're doing it the right way especially because people are coming to Aspiration because of our brand and our credibility around climate. We want to ensure that people know that when they open an Aspiration account, they become part of our movement. 

That means that we have to think about not just the number of trees that are being planted, but the kinds of trees that are being planted. We try to focus on planting trees that are going to be having as fast and large of an impact as possible. We're planting in places like Kenya, Mozambique, Madagascar, Honduras, Brazil, as well as in the US. But ensuring that the tree planting projects are using ground that needs to be restored in terms of reforestation, protecting biodiversity, not harming native ecosystems, and supporting local communities with good jobs with benefits. This has to be done in a smart, long term way that provides for additionality of impact that provides for survivability, and that actually delivers the kinds of results not just in one year, but for decades to come.

There’s a whole discussion around how to finance the transition, projects ranging from carbon sequestration to clean energy - what would be the top priorities from your perspective?

Andrei Cherny: I think we need to do all of the above – we have got to focus on reduction and mitigation. We have to focus on removing carbon from the atmosphere, on what governments can do, on what corporations can do and on what individuals can do. We have to focus on reforestation, as well as preventing clear cutting. You're right, a lot of these places in the current debate are ones of enormous controversy, and you're seeing people with the best of intentions going at each other and saying, no, this is the path versus that path. 

My view is that we don't have time for those academic debates. We have to do all of it. And we have to do all of it the right way. We can't afford to be ideological about it. Sometimes people will say, well, by focusing on what individuals can do, and helping individuals enlarge their own personal climate impact, you're taking the pressure off of corporations, you're taking the pressure off of governments because that's where action has to be. My response is, look, that may or may not be the case, but we don't have the time to be ideologically pure about this. We all have to take action as individuals, and as consumers, pressuring companies we do business with – all of those things have to happen at the same time.

What advice would you give to a bank that wants to do what Aspiration does? What were some of the challenges you faced in building a bank centered around climate change values?

Andrei Cherny: There’s challenges in building any new financial institution, regulatory and otherwise. Aspiration became one of the first, if not the first, US neobanks to go independent and to break off of a third party bank sponsor. We created our own independent structure back in 2018, and built our account around a cash management account structure, so there's all of those types of challenges that any new financial institution has to grapple with. 

But there's also just the challenge of having people rethink how they think about their money. For so long, the offer to consumers has only been about coming to our bank, and you'll pay less fees, or you'll get a higher interest rate, or you'll get these monetary benefits. That's part of it, but again, the daily decisions we make with money are inherently moral decisions as well, about where we're going to spend and where we're not going to spend and where we're going to bank and where we're not going to bank. And we are making those decisions every day. 

That requires a different view of consumers and we're seeing more and more people in the US and around the world embracing that. For the banks out there that want to make this shift, it starts with changing their offerings, it starts with helping their customers see their own sustainable impact, just as much as they see their own budgetary impact. It starts with providing elements like embedding their climate impact into the daily transactions they're making. But it has to start with changing what the bank does. It's not enough for a bank out there to put out a green colored debit card or credit cards and to keep on financing fossil fuel projects that are destroying the planet. Authenticity matters, honesty matters. Transparency matters. Banks have to start by looking inward and saying, what are we going to do before we try to offer something new to our customers?