Ethical Banking

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Consumers are increasingly starting to consider a bank’s ethics and values when it comes to choosing their next debit/ credit card or savings account.

Ethical banking was brought evermore to the fore after the signing of the Paris Agreement in 2015 that sought to unify countries and enterprises under the sole aim of reducing global warming and stemming its effect on the wider world.

It’s also not just about what they AREN’T funding, but also what they ARE. 

Ethical banking also encompasses to what extent banks are investing in local businesses, sustainable and renewable energy and causes that help those in need.

There’s a whole subjective spectrum of what makes a bank’s investments and actions ethical or not.

BP for example, are one of the largest oil producers in the world and are responsible for some of the world’s worst oil disasters in history – not least their controversial origins of mining in the Middle East.

But the company have promised huge investments in renewable energy over the next decade and would become one of the biggest investors in the field if these plans are realised. 

You can see how these ethical lines quickly become blurred; would a bank, with a vested interest in BP, be considered less or more ethical after BP’s commitment to renewable energy? 

They’re now technically investing in a company with a commitment to (supposedly) making the world a better and more sustainable place and with the financial power to make a real difference. But they’re still primarily a mining company, ruining animal habitats, drawing a finite resource out the ground for profit and spilling ‘a smidge’ of it here and there in the process. 

This example is a little easier to answer. But these lines become evermore blurred with other big companies that have less obviously destructive tendencies.

It’s also a question of where you draw a line between the return you’re getting on your savings and that bank’s environmental and social impact.

First Direct used to offer some of the best switching offers and have some of the most consistent and highly rated customer service reviews. But by being part of the HSBC Group, they are part of one of the most controversial banks in the world, turning a blind eye to, and profiteering from, Mexican cartel money laundering for many years and giving their support for the controversial security law in Hong Kong (don’t get me started on this one).

But there are a number of U.K banks that put these ethical considerations at the forefront of their business model, some of whom you may not have heard of before…

Triodos Bank

Triodos have been around since the 1980s. Their values are centred around: sustainability, transparency, excellence and entrepreneurship.

They vow to only lend money to organisations that bring about positive and lasting change at a social, cultural and environmental level.

They also publish a list of every organisation they invest in on their website, which you can view here.

They offer most traditional banking products including debit, savings and investment accounts; they don’t, however, currently offer credit cards and it “is not a product [they] are looking to launch in the foreseeable future”. This isn’t specified if this is due to ethical reasons or not.

Their debit cards do look quite funky too, but the account does comes with a £3 a month fee.

Their best instant access account currently offers 0.3% interest with their 1 year fixed-rate bond account offering 0.4%.

The minimum opening deposit for the fixed rate account is £500 but with the instant access you can start saving from just £1.

Ecology Building Society

Ecology Building Society are a bank I’d never heard of before.

They strive to build a greener society by providing mortgages for properties and projects that respect the environment and support sustainable communities

This is all funded through their range of savings accounts of which they currently offer 4 different types:

  • Easy Access – 0.2% interest (min. £25)
  • Ecology Cash ISA – 0.45% interest (min. £25)
  • 90-day Notice – 0.35% (£500 – £4,999); 0.5% (£5,000 – £9,999); 0.7% (£10,000 – £24,999); 0.85% (£25,000+)
  • Regular Savings – 1.1% (min. £25; max. £250 p/month) Can only withdraw twice p/year

These look like quite interesting and fairly competitive rates in this climate for a lesser known bank and are certainly worth a second glance.

You can see the projects they’re involved in here. They’re also incredibly open about their carbon footprint as a business, even including their staff commute which is something I haven’t seen before.

They don’t offer debit or credit cards.

Charity Bank

Charity Bank were founded to support charities with loans they couldn’t get elsewhere.

You can see how much they have lent to local causes, since 2002, split by region here.

Some stats on their site show something quite remarkable. 79% of the organisations they have lent to claimed that Charity Bank’s loan funded activities that grant funders would not, and a massive 42% of these organisations would have gone under without it.

This an an incredibly transparent insight into the good your savings are doing when banking with them.

They only offer one 33-day savings account at the moment at 0.2% (between £10 – £24,999) and 0.35% (between £25,000 – £500,000). They usually offer a 93-day option but this isn’t available at this time.

*

All three of these banks are FSCS protected up to £85,000.

Whenever you’re looking into alternative banks such as these that aren’t as well-known, it’s important to do your due diligence to make sure your money is covered up to this amount.

Don’t just rely on the FSCS badge appearing on their website – this can obviously just be copied.

Use this checker to see if your bank is covered by the government scheme.

2 thoughts on “Ethical Banking

  1. I’ve banked with First Direct for nearly 25 years now – it’s disheartening what their parent co HSBC have been/are still involved with but at the moment, I’m not prepared to sacrifice personal convenience/easy banking for another bank that might be more ethical, but which may not satisfy my banking requirements.

    In a similar way with my investments, I have investments in ‘sin stocks’, by virtue of being invested in index trackers – so too have many FIRE-wannabes in that case!

    Not many will do what diy UK investor has done, by which I mean ditch all his Vanguard investments.

    Perhaps once I’ve stopped accumulating, I will look to see what I can do to make my portfolio more socially responsible and ethical.

    Like

    1. Yeah, tbh I think it’s difficult in this day and age to fully dedicate yourself to ethical living. Every company and every product seem to have some negative attached to it in some way. I definitely invest in sin stocks but that isn’t my focus at this point in my life.

      Yeah DIY Investor is a really interesting example. I wouldn’t ever judge someone for banking or investing in certain companies as I’d just be a hypocrite, but it’s good to know there are options out there like the ones detailed in this post. Apparently Co-op Bank are quite sustainability focused despite being a little more well-known than these ones.

      Liked by 1 person

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