I hadn’t really thought about what banks invested in until a few years ago. I just popped my money in the bank, took it out again, and so on, and that was that. No thoughts about it, or how ethical the banks might be. And then slowly I began to become aware of links with the high street banks to the arms trade and bomb making, to speculation on food prices (pushing prices up), and to investment in environmentally damaging activities like oil and gas and tar sands mining.
I hadn’t realised that the banks depend on our money to fund these types of investments and to keep them afloat. One of the few ways to change this is to switch to a more ethical bank, which helps to create a fair banking system that works in our interests. Yet surprisingly, 75% of people have never switched current account bank account providers before.
Like most people I find the world of banking confusing and difficult to navigate. I had initially thought the Co-Operative Bank were the most ethical bank out there. Indeed, we have a few financial services through the Co-Operative Bank, but surprisingly it turns out there are other more ethical banking alternatives out there. So I have been doing a little bit of research into the best UK ethical banks which I thought I’d share here on Moral Fibres. I found the Move Your Money website a good starting point, as well as my trusty favourite, the Ethical Consumer website.
Ethical Current Accounts
Coventry Building Society (which has branches UK wide, despite the name) is ranked as the most ethical provider of current accounts by Ethical Consumer. Quite a few other building societies also rank highly, including Cumberland, Leeds and Nationwide. The reason that building societies are more ethical than banks is that they face stringent regulations which limit the amount of money they can invest in certain industries. Their profits are also invested back into the business for the benefit of borrowers and savers rather than shareholders, giving them that added edge. Coventry Building Society rank at 13.5 of the Ethical Consumer League Table (the top score being 20) – the Co-Operative Bank surprisingly rank at 7.5, making them lower in the league table than the beleaguered Northern Rock, and only slightly higher than Santander.
There are very few other ethical current account alternatives to the building societies. The Salvation Army’s Reliance Bank, with it’s roots in the Christian charity, offers an online current account, and the ability to pay in through a nominated high street bank. All profits go back in to the Salvation Army’s work, including with the homeless. Otherwise the only other option is to bank with a credit union. With more than 400 now active across the UK, credit unions are run as financial co-operatives owned and run by their members helping those on low-incomes get affordable credit. Twenty one of them offer current accounts – check here to see if there is a credit union near you that offers current accounts to it’s members.
Ethical Savings Accounts
The ethical savings account market is wider than the current account market, and there are a lot of great innovative ways to ethically save your money. As well as the regular building societies and the Salvation Army’s Reliance Bank, there are some other notable inclusions. It’s important to bear in mind that with these options interest rates are not hugely competitive as they are unable to compete with the Big Five banks (Lloyds, RBS, HSBC, Barclays and Standard Chartered), which own 85% of the banking sector, however you are making an ethical difference with your money.
- A Foundations Share savings account from the Ecology Building Society tops the Ethical Consumer’s list of most ethical saving accounts. Ecology provide mortgages for eco homes and similar sustainable developments that have traditionally been difficult to get a mortgage on. This sustainable development is funded through their savings accounts, which are simple and transparent and can be accessed online or by post.
- Charity Bank is banking with a difference. Not only does the bank lend to charities, but is a charity itself, although is fully regulated by the FSA meaning your savings are guaranteed. The bank supports 1,000 charities and community organisations, and says it has “improved the lives of 3.5m people”. Transparency is key to the bank – customers can track where money has gone by following projects it has invested in on the website. They offer a savings account for adults, and there is also a Small Steps ethical savings account for children.
- Triodos Bank finance projects based on their social, environmental or cultural impact, and refreshingly only lend to businesses and organisations that promote or provide long-term positive change. From wind farms, to organic farms, to fair trade enterprises, social housing, or community projects, customers are able to see where money has gone and what its doing via their website. They offer a wide range of ethical savings accounts, including a savings account for children, and uniquely offer a Charity Saver account where you can donate 0.25% of the annual balance of your account to one of ten charities (including Amnesty International, Soil Association, Friends of the Earth, Freedom from Torture, the Fairtrade Foundation and more).
Ethical Cash ISAs
Ecology, Charity Bank and Triodos top the ethical league table for Cash ISAs, with the building societies not too far behind. The Reliance Bank also offer an ISA.
Ethical Mortgages
If you’re looking for an ethical mortgage to fund an eco build then a mortgage from Ecology is the most ethical on the market according to Ethical Consumer’s list of ethical mortgages. If you’re looking for an ethical mortgage on a standard house then the most ethical option is to use a building society, such as Skipton, Coventry, Cumberland or Kent Reliance, or the Reliance Bank (who also offer buy-to-let mortgages).
If this has inspired you to switch to a more ethical bank then you’ll be pleased to hear that now is a good time to move your money, as you can now reliably switch account in just seven days. This is definitely a lot less hassle than it used to be.
What do you think? Do you bank with an ethical provider, or would you consider switching banks to a more ethical one?
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BRILLIANT!
Thank you so much. Really useful!
Thank you very much. I also only recently discovered my precious first direct who have served me so well, invests in everything that makes me shudder so I am sadly in the process of switching.
My pleasure Jill, glad you’ve found the article useful! Good luck switching!
Does this bank use fractional reserve lending?
If it does then it is neither better nor worse than all of the rest.
I’ve linked to quite a few banks – you would need to contact the specific bank you had in mind to find out if it does use fractional reserve lending. I understand the problems with it, and where you are coming from, but the banks listed above invest more wisely – e.g. not in arms dealing or natural resource exploitation, compared with some of the big name banks, which I personally think does make them better than others. Interesting to hear a conflicting point of view though.
Stu is correct. Although rather stupid question as Fraction Reserve is pretty much the only type in plac e globally (unfortunately).
Whilst fractional reserve banking is used and abused the world will continue to spiral downwards.
Money born from debt is not the way forward. If we paid back every penny we owe to the banks, and the governments paid back every penny they owe to Central Banks there would not be a single penny in circulation… and we would still owe BILLIONS to the banks. Billions which does not exist, only way to pay them their interest is to take more loans!!! More loans = more interest = more debt. Then you have the World Bank loaning to countries (often ones with natural resources) it knows cannot repay, and when they cant pay then the US swoops in and says “we’ll save you as long as we can have cheap oil, or build an army base, etc”
Capitalism (or the way it is utilized in the modern age) makes me sad.
Triodos also now offer a current account for businesses (including small businesses) and charities.
Just the sort of info i need ~ Co-Op’s link with eg Lloyds is worrying, and tho First Direct rate high for customer service they dont seem to have an ethical policy ~ your links & poss options much appreciated!
My pleasure Jackie! Glad I could help! :)
Do you have any info on Metro Bank’s claims of being an ethical bank? Thanks for the useful info. We have to make our money count!
Im at the start of reviewing what options are available towards more ethical lines..so money is amongst my queries , I’m considering just how debilitating it would be to the Large Corporate Banks if 90% of Us the public switched to ethical banking ,,how deflating that ‘apparency’ of power would be to this sector..a bouncy castle losing air rapidly comes to mind..as their power is non existent without our input I believe or at least we are a significant portion ..! Empowering to consider .
Hilary
I like very much the bouncy castle deflating, Could do a sketch Monty Python style. Lots of water too.
I have been doing Source Foods for over 28 years and tridios bank (already have money snobs club, basically) did not believe in me (fixed idea dumb and righteous and that is why biodynamics has stayed very small) at the onset of my want to be with the ethical all those years ago. Co op was the only other option and did that for a number of years. They were light years behind and made simple transfers long winded and cost. In the skunk and washing powder town I work near there was a lone Barclays, so opted for that as it was chqs then and getting to the co op, no where near was not conducive to all hours at the helm. Since then lloyds and back to barclays.
I will be contacting tridios again to see how the who you know rather than what you do gang respond
I can’t see a date when this site was last updated but following the link to the ethical consumer website shows the Coop bank 2nd from top at 12.5 out of 20, just below the Triodos bank at 14.
Is the situation that fluid or has the Coop been revamped after loosing its independence from outside influences?