A quick guide to ethical banking
We know how important it is to give more, and to choose carefully where we give to make the biggest impact. I think it’s also important to consider the impact we make with the money we keep.
Obviously, when we put money into our bank accounts, it doesn’t just sit in a vault waiting for us to spend it. It is used and invested by the bank. The question is, where?
Banks do not have a good reputation for ethics, and were widely criticised for their role in the financial crisis. Less often discussed is the harm banks make with their choice of investments.
Because it is literally our money being used to do this, we are led into tricky ethical territory. Would you invest your money in the arms industry, for example?
If you bank at one of the ‘Big Five’ in the UK – Barclays’, HSBC, Lloyds, RBS or Santander – you already are.
How about investing in projects that damage the environment? All these banks invest heavily in fossil fuels. According to The Ecologist, HSBC has financed some of the most environmentally irresponsible projects in the world, including a gas pipeline project in Burma and the activities of some of the world’s most notorious mining companies.
So what ethical alternatives are there? I strongly recommend Ethical Consumer’s money product guides, where banks are ranked in order of their ethics. You can also use sliders to prioritise issues that are most important to you, such as politics or product sustainability. Subscribing to Ethical Consumer also allows you to access well referenced reports detailing how each bank’s ethical rating was calculated.
The results are sometimes surprising. The Cooperative Bank styles itself as ‘the ethical high street bank’, yet it receives a current account rating of 9.5, compared to Nationwide, Metro Bank and the Islamic Bank of Britain, who all receive a score of 12.5. Oh, and Nationwide’s FlexDirect account is ‘widely recognised for offering one of the best interest rates in the savings market’, so switching to a more ethical bank might actually be better for your finances, too.
In terms of savings accounts, there are some brilliant companies dedicated to an ethical approach, such as the Ecology Building Society, Charity Bank and Triodos. EBS offer sustainable mortgages for properties and projects that respect the environment, and it is these types of project your savings are invested in, too. I switched to their savings account from Santander a year ago; the process was quick and simple, and EBS’ customer service has been second to none. Best of all, I am actively encouraged to voice my opinion and vote on key issues concerning where my money will be invested. Meanwhile, Charity Bank only makes loans to charities and social enterprises, and Triodos offer socially responsible investment funds.
Whatever you choose, remember to let your current bank know why you are leaving them, and who you are leaving them for. We may not be able to make the Big Five ethical overnight, but we can seize control of how our money is used, use it for the good of the world, and make the banks sit up and take notice.