Want to find out who the best ethical banks are in the UK in 2021? Read on!
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. That was that. No thoughts about it, or how ethical the banks might be. Then I found out that how we manage our money can be one of the most impactful environmental things we do.
What’s Wrong With High Street Banks?
The problem is that the money that we deposit in the bank doesn’t just sit in a vault until we need to withdraw it. Banks use the money we deposit in our current and savings accounts to fund their other profit-making banking activities – from loans to investment. This means, depending on who you bank with, your money could be funding all sorts of projects that you don’t agree with and don’t necessarily know about.
I was pretty uncomfortable when I began to become aware of links with the high street banks to pretty unsavoury things. I learned that the High St banks are linked to the arms trade and bomb-making. Other things I learned were that banks speculate on food prices (pushing prices up), and that they invest in environmentally damaging activities like oil and gas and tar sands mining. And they aren’t just investing their money, they’re investing our money that we deposit in our accounts.
Fossil Fuel Financing
I looked into it more, and between 2015 and 2018 alone, the world’s biggest banks have invested $1.9 trillion into fossil fuel financing. Edie reports the UK’s worst offenders are Barclays, who have provided £91 billion in funding to fossil fuel companies. This includes companies involved in coal, tar sands, Arctic oil projects, and fracking, as well as the major players in the extraction and use of fossil fuels.
HSBC has also contributed £67 billion over the same period, and Greenpeace also reports that both companies own shares in fracking companies.
What’s more, according to a 2018 report from Ethical Consumer:
- RBS has shareholdings in companies that are involved in deforestation due to palm oil. Within these companies are serious workers’ and human rights issues.
- HSBC, Lloyds Bank, RBS, and Barclays all lend to companies selling arms to Israel. What’s more, Barclays and HSBC and Barclays both own shares in these companies.
- Santander has over 21 subsidiaries in tax havens pointing to unethical tax avoidance strategies.
- Between January 2014 and October 2017 Lloyds Bank made $2,986 million available to nuclear weapon producing companies
Best Ethical Banks for 2021
As banks depend on our money to fund these types of investments and to keep them afloat, one of the ways to change this is to switch to a more ethical bank. Doing so 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
With an increase in UK ethical banks, there’s never been a better time to switch. Here’s my guide to the best UK ethical banks for 2021 – from current accounts to savings accounts, and to credit cards and mortgages.
Ethical Current Accounts
Triodos offers an ethical current account. What makes it ethical is that Triodos finances projects based on their social, environmental, or cultural impact. What’s more, refreshingly, they 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 it’s doing via their website.
Building societies are more ethical than high street banks because they face stringent regulations that 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.
Building societies that offer ethical current accounts include Cumberland Building Society and Nationwide. Both are ranked fairly high as ethical providers of current accounts by Ethical Consumer, and are great choices if you would prefer your money to be backed by a High St presence.
The so-called app-based Challenger Banks such as Monzo and Starling are currently good ethical alternatives. These banks do not currently make large corporate loans or investments, and therefore do not directly fund industries like the fossil fuel industry. However, it is important to bear in mind that they may do so in the future. I have not been able to find any commitment that says that they will not.
I bank with both Starling and Monzo and really rate both. Starling in particular has changed my outlook on money. You can set up ring-fenced savings pots and savings goals within your current account, and their useful app interface gives you much greater control over your money. It’s not hyperbole when I say switching to Starling has been life-changing.
With the Monzo Premium account, you can even ditch the plastic bank card, and switch to a sleek recyclable metal one instead.
I just wish they could both commit to only making ethical investments in the future.
Ethical Savings Accounts
The ethical savings account market is wider than the current account market. What’s more, there are a lot of great innovative ways to ethically save your money.
As well as the regular building societies, there are some other notable inclusions. It’s important to bear in mind that with these options interest rates are not hugely competitive. This is because they are unable to compete with the Big Five banks (Lloyds, RBS, HSBC, Barclays, and Standard Chartered. These banks own 85% of the banking sector and exert a lot of control. Not that interest rates are in great shape in 2021.
Ecology Building Society saving accounts top the Ethical Consumer’s list of most ethical saving accounts. Ecology provides 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. These accounts are simple and transparent and can be accessed online or by post.
If you are looking for an ethical savings account, then Charity Bank is banking with a difference. Not only does the bank lend to charities, but is a charity itself. Don’t worry, it 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 various ethical savings accounts for adults.
Ethical Cash ISAs
Ecology, Charity Bank, and Triodos top the ethical league table for Cash ISAs. The building societies are not too far behind on ethics, so don’t be afraid to check out building society offerings.
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. Ones to try include Skipton, Coventry, Cumberland, or Kent Reliance Building Societies.
Ethical Credit Cards
Until recently I didn’t think you could get an ethical credit card. Then I discovered a wave of mobile-only app-based challenger banks that are beginning to roll out credit cards. This means you are no longer tied to the big banks for your credit needs.
Again, like the challenger banks, these app-based credit card companies do not currently make large corporate loans or investments. They, therefore, do not directly fund industries like the fossil fuel industry. However, it is important to bear in mind that they may do so in the future.
Jaja credit cards make credit simple. Their app and online-only banking system is designed to give credit card customers easier access, more control, and greater flexibility.
In order to treat customers fairly and to be a responsible lender, instead of focusing on 0% balance transfer offers, they’ve invested more in their customer experience, product and services. They’ve also focused on the ability to help people better manage their payments and spending.
I’ve included Starling in this list as there are whispers of Starling adding credit cards to their mix of financial products. This makes this an ethical credit to look out for if you currently bank with Starling or are planning on switching to them.
Tymit is a new concept in credit cards. When you purchase something on your Tymit card, you pay back the balance in fixed installments meaning you don’t get stuck in a minimum payment rut that takes years to clear.
At the point of purchase of an item, you select a repayment plan that is affordable to you. You can repay over 3 months, in three fixed monthly installments at 0% APR. Alternatively, if you need longer to pay, you can spread the cost with fixed installments over 6, 12, or 24 months. A transparent cost for each option shown upfront. And by paying a fixed fee to borrow, you don’t pay interest on your interest.
As your pension will most likely be in the hands of your workplace, you may have little control over who your pension is invested with, and what it is invested in. If this is the case, then encouraging your workplace to divest to a more ethical pension scheme is your best way forward.
If you are self-employed and/or have a personal pension then the good news is you have more autonomy over what you do with your pension. The bad news is that choosing the right pension can be incredibly complicated. Not only do you need to find a more ethical pension company, you then need to find an ethical fund to put your money in.
I would really recommend seeking independent financial advice on this one. This is because with all investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest.
Ethical pension schemes are something I want to explore in more detail on the blog. Do watch this space!
How Easy Is It To Switch To An Ethical Bank?
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. This is because you can now reliably switch accounts 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?
Do also check out my guide on how to make ethical investments.