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 was 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 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.
Coventry Building Society ranks at 13.5 of the Ethical Consumer League Table (the top score being 20) – the Co-Operative Bank surprisingly ranks 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 its 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 into 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 its 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 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, 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 it’s 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
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?