8 minute read
Paying forward
Doing good:
Aspiration aligns people’s values with spending and investment
Paying it forward
Joe Sanberg didn’t want to co-found another fintech that promised change while relying on a broken financial system that was bad for the planet and for society. In that sense, Aspiration isn’t one
That’s Joe Sanberg, entrepreneur and outspoken critic of fintechs, which he believes are in a uniquely powerful position to change the world... but, for the most part, don’t. Which is why, when he launched what looks suspiciously like a fintech with Andrei Cherny in 2013 – both men from the wrong side of the social tracks who’d clawed their way up the cards and look after its cash, while Aspiration itself is registered as a broker/dealer managing the $124million Redwood Fund, which has consistently outperformed Morningstar-rated funds as well as the S&P 500 over the past five years, including through the pandemic. Named after the tallest trees on Earth, the fund uses rigorous analysis of a companies’ sustainable ESG practices to find impact investment targets that it believes are poised for growth.
It makes no secret of the fact it despises most mainstream banks’ investment policies, declaring on its homepage: “There’s a good chance your bank is using your money to fund oil projects that destroy the climate.” It goes on to state that the four biggest banks in the US lend more than $240billion of ‘dirty money’ to fossil fuel projects every year, asking ‘did you know that’s what your money was going towards?’.
“The uncomfortable truth is that most people don’t,” says Sanberg. “When they
professional ladder – the ambition was for Aspiration to be in a sector of its own.
A platform that pays people to be good by closing the ethical loop between spending and saving, Aspiration is a fully-automated vehicle for environmental, social and governance (ESG) impact services, which offers guaranteed fossil fuel-free investments, a payment card providing cash incentives to steer users towards more conscious consumerism, and a carbon-offsetting credit card that sees a tree planted somewhere every time it’s used.
“It’s a category that’s never existed before. Aspiration has defined it and, having created it, is growing it,” says Sanberg.“We happen to use financial products as one of the ways we deliver automated social impact services, but I have zero interest in being a fintech company.”
Aspiration has, of course, (as with most challengers in the States) had to get close to a licensed bank – in this case Coastal Community Bank – to issue its debit
do find out that their money is being used for loans to fossil fuel projects, or to private imprisonment companies that perpetuate institutionalised racism, or gun companies – they are shocked. And as more people awaken to that reality, Aspiration can offer them a home for their financial services as well as their social impact.”
INFORMED INVESTING
What drives Aspiration is the idea that we can all, through more considerate investment and spending decisions, ‘make money while making the world a better place’. The problem is, most consumers don’t have time to do the research to balance those decisions – hence, Aspiration’s automated model.
Account features include receiving up to 10 per cent cashback on socially-conscious spending from mission-based merchants such as TOMS shoes, whose tag line is ‘we’re in business to improve lives’ and which donates one third of its profits to good causes. Users can also help plant trees with every purchase by rounding up to the nearest whole dollar. Meanwhile, the handy Aspiration Impact Measurement tool acts as a ‘personal Fitbit for your social impact’.
“It’s an algorithm that shows you a people score and a planet score for the places where you spend money on your Aspiration card,” explains Sanberg, “so that you have the tools at your fingertips to choose merchants that are most aligned with your social values.”
Premium customers can also use the Aspiration Plus Planet Protection feature, which tallies up the carbon output of all their fuel stops, then automatically buys offsets to help counter the climate change impact – although, for all its good intentions, it is perhaps worth noting that environmental campaigners such as Greenpeace argue that planting trees and offsetting your carbon footprint is still nowhere near as effective as reducing emissions in the first place by cutting out journeys altogether. But, in a world where we’re often shamed by our choices, automatic offsetting is at least a step in the right direction.
All of these features require technology, but Sanberg’s insistence that Aspiration is categorically not a fintech company is perhaps more to do with the ideology behind it rather than the mechanics. He particularly takes issue with fintechs across the financial sector who help perpetuate the Aspiration itself operates a freemium fee myth of no-fee banking or no-fee trading. structure, but its ethics dictate that users
“Nothing is free,” he says. “If a company should come to their own judgement on tells you that something is free, that means what its services are worth. Its Pay What one of two things. Either you are the Is Fair policy on its basic account enables product – your data is the product – or customers to pay what they can afford they’re going to find some way to charge a – but that still gets them five per cent fee that is disguised as something else.” cashback on socially conscious spending
It’s a cruel myth, he claims, because it plays and the plant-a-tree cash round-up option. into a deceit that the poorest can participate. “To be clear, we don’t communicate that
“Our customer base is primarily middle- as a no-fee offering,” says Sandberg. “We say and upper-middle-income people,” says ‘we hope we’re going to do a good enough Sanberg. “We don’t have a feature set that’s job so that you want to voluntarily pay. built for low-income people, because And if you don’t think we’ve done a good – here’s the truth that venture capitalists enough job, you have the right to pay us won’t tell you – you need government to zero and we’ll try and do better’. Think help low-income people. about the distinction, in terms of integrity,
“I believe in the power of business to solve between that, and saying something is free some things, but I think, for the hardest but then hiding fees somewhere else.” problems, we need government action. We Customers can, of course, opt for the need big, bold FDR (Franklin D Roosevelt $15-a-month Aspiration Plus account, with his New Deal)-style government action.” which includes carbon-offsetting their fuel
That’s a view borne of personal and up to 1.00 annual percentage yield on experience. Sanberg was raised by his their savings. But, whatever the spread of single mum and the pair lost their home those users, in line with its ethos of paying to foreclosure when he was a teenager forward to protect the planet, Aspiration – forcing them to live pay cheque to pay commits to contribute 10 per cent of its cheque, ‘like so many Americans’, he says. earnings to charity. It’s built tools to enable
“It’s different from the story of so many customers to automatically support causes founders. Unfortunately, a lot of innovation aligned with their beliefs, too, because, capital has funded people who grew up with wealth It’s a as Sanberg says: “Part of aligning your values and and privilege and, as a result, a lot of companies that are more or less built to serve category that’s never your money is knowing you have to service other people with your money, to other rich people,” he says. Both he and Cherny worked their way through existed before. Aspiration the extent you can.” Aspiration’s positioning has struck a chord, college, after which Sanberg wound up in financial services, while Cherny has defined it and, having particularly as societal values shifted during the pandemic. Two million ‘fans’ are now eventually walked through the doors of The White House, working for both created it, it’s growing it signed up – including several activist Hollywood A-listers. Most recently, Aspiration President Clinton and Vice announced an investment President Gore, and supporting Senator from actor/producer Robert Downey Jr.’s Elizabeth Warren in her campaign to launch Footprint Coalition Ventures, part of the Consumer Financial Protection Bureau. an additional $50million raised from He was also a financial fraud prosecutor. institutions including Deep Field Asset
“Having spent time in both the public Management and AGO Partners, as well and private sectors, I saw first hand that big as individuals including Cindy Crawford banks and Wall Street too often put profits and Kaia Gerber, which takes its total ahead of what is best for people and the fundraising to more than $250million. planet,” Cherny has said. “I think people are craving more tools
“We both saw this need for a financial to do good in the world,” says Sanberg. “In company that could help people move the private sector, Aspiration is the leading their money in a way aligned with their deliverer of those kinds of tools – and we’ve values,” explains Sanberg. only just scratched the surface.”
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