Tag

money

Resources

Best Ethical Banks, Current Accounts, Credit Cards & More For 2021

best ethical banks uk

Want to find out who the best ethical banks are in the UK in 2021, for current accounts, ISAs, mortgages, and credit cards?  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 can do, particularly when it comes to climate change.  

Why Should We Switch to An Ethical Bank?

It’s really important to switch to an ethical bank because the money that we deposit into our bank account 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 one of the UK’s worst offenders is 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. 

The other is HSBC, which has contributed £67 billion over the same period. 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.  

Please note this post does not constitute financial advice and is provided for general information purposes only. I have no commercial relationship with any of the banks or financial products listed here.

Image of bank notes on a table with a blue text box that says guide to ethical banks - from current accounts to credit cards and more

Best Ethical Current Accounts

Triodos Bank

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

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.

Challenger Banks

Monzo, one of the so-called app-based Challenger Banks, is currently a good ethical alternative. Monzo does not currently make large corporate loans or investments, and therefore does 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 Monzo and really rate it. Monzo 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 Monzo 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 Monzo could commit to only making ethical investments in the future.

I used to include Starling in this list. However, in March 2021 Starling took investment from the Qatar Investment Authority (QIA). This authority was set up in 2005 to invest Qatar’s substantial oil and natural gas revenues around the world.

Starling bank says thatone of the key roles of QIA is to reduce Qatar’s dependence on revenues derived from oil and gas and to expand investment into non-hydrocarbon sectors. That’s one reason why it has been investing in a range of well-known British brands in addition to Starling.

This is a disappointing move from Starling, and as such, I don’t class Starling as an ethical bank.

Image of british money - pound notes and coins

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.

Building Societies 

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.

Alternative Banks

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.

Meanwhile, Triodos Bank offers a wide range of ethical savings accounts, including an ethical savings account for children.

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.

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.  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

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.

Tymit

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 is shown upfront. And by paying a fixed fee to borrow money, you don’t pay interest on your interest.

Ethical Pensions

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. The Make My Money Matter is a good starting point to find out more.

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 ethical 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 as 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.

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.

Resources

How to Make Ethical Investments That Make Positive Changes

how to make ethical investments

Ethical Consumer Magazine has some handy tips for Moral Fibres readers on making ethical investments.

There are many everyday ethical decisions that we now consistently make. These include buying Fairtrade tea, choosing a green electricity supplier, or shunning Starbucks in favour of local independent coffee shops.

What About Ethical Investments?

But what about ethical investments? Managing money is another opportunity to make positive ethical choices. However, as yet it isn’t as mainstream as it could or should be.

Ethical Consumer has just released their first guide to Innovative Finance ISAs. This shows consumers how to make ethical investments so that they can potentially use some of their savings to more effectively help tackle issues as diverse as climate change and the housing crisis. So let’s look at what an Innovative Finance ISA is, and take a look at the most ethical ways to invest in one.

What Is an Innovative Finance ISA?

Innovative Finance ISAs (IF ISAs) are a relatively new savings product introduced in 2016. It offer investors an alternative to the traditional Cash and Stocks and Shares ISAs.

They are great news for ethical consumers who are looking to use their savings for the benefit of society and the environment. This is because they offer the potential to invest in fully transparent ethical projects.

An IF ISA is essentially a way to invest in projects and businesses via a crowdfunding platform such as Abundance or Lendahand. Potentially this gives you total control on where your money is invested. The good news is you can invest in some of the projects for as little as £5, making it an easy way for new ethical investors to test the water.

Changing money markets

IF ISA’s currently account for less than 1% of the UK ISA market, however, they are rapidly growing in popularity. Last year  £290 million was invested in them, eight times more than in 2016/17.

For too long consumers have allowed banks and financial institutions to take decisions for them. The problem is sometimes banks have invested in damaging products and businesses, like fracking or palm oil plantations.

Now consumers can cut out the middleman at the bank and create portfolios of ethical projects to invest in using IF ISAs.

There are currently more than 65 platforms in the UK offering IF ISAs. Each with a wide range of projects to invest in. Aware that consumers are now more likely than ever to look for an ethical option, some of these platforms are marketing themselves as offering ethical investment opportunities.

How to Make Ethical Investments With The Best Innovative Finance ISAs

We’ve done the research and awarded four platforms ‘Best Buy’ status these are Abundance, Energise Africa, Ethex, and Triodos Bank.

All four platforms offer investments in a range of environmentally and socially-minded projects both in the UK and abroad.

Abundance

Abundance has been a pioneer of raising green finance ever since it launched in 2012. Historically, Abundance has allowed customers to invest even very small amounts, from £5, in different projects. It only funds what it calls ‘socially useful’ projects. These have largely been green energy in the form of wind turbines and solar farms. However, they have also included a project recycling used cooking oil into bio-diesel and, most recently, affordable housing.

Energise Africa

Energise Africa is designed to provide working capital to projects that install and sell solar home systems in sub-Saharan Africa. The aim is to provide more than 111,000 rural families access to renewable energy over the next three years. Home systems tend to provide simple electric lighting and phone charging facilities.

Ethex

Ethex recently funded the Solar for Schools Community Benefit Society (CBS). This was set-up in 2016 to enable schools in England and Wales to derive some financial and environmental benefits from solar panels.

Triodos

Triodos is the first UK bank to launch its own crowdfunding platform. Since its launch, the Triodos crowdfunding platform has raised £20 million for eight pioneering organisations delivering positive change. An example is the £1.8 million bond that was successfully raised for Mendip Renewables in 2018. This organisation owns and operates a 5MW community solar scheme and uses its retained profits to support charities in Somerset.

Ethically Invest Sensibly

In the Ethical Consumer guide to ethical investments, it reminds potential investors that whilst only Financial Conduct Authority (FCA)-regulated platforms can offer an Innovative Finance ISA, they come with no other protection. IF ISAs don’t qualify for the savings element of the Financial Services Compensation Scheme (FSCS) that protects up to £85,000 should a firm go bust. Neither do they get the FSCS investing element that covers up to £50,000 in case your investing platform goes bust and hasn’t done what it is meant to with your money.

It is also more difficult to access your money with an IF ISA. Most of the assets (or loans) will be fixed term, making instant access impossible. You should, therefore, take into account the length of time the asset is held for when making a decision about what projects to invest in.

That said you can limit your risk by investing in these Best Buy options that work closely with projects to ensure that they succeed, and by investing small amounts of money into a number of projects spreading your risks.

If you can afford to take a risk with a small amount of your hard-earned cash, then these platforms provide consumers the opportunity to make ethical investments directly into projects that have tangible positive impacts.