What is Ethical Banking? 4 Step Guide
£12.2 billion is currently invested in green and ethical funds in the UK. The demand for ethical banking alternatives has never been higher. This demand is fuelled by the mainstream banking sector; which continues to invest in fossil fuels and nuclear weapons.
If you’re interested in switching to an ethical bank or just want to know more about this new phenomenon we provide the full low down on what ethical banking is, including who is topping the ethical tables, and how to switch to a more ethical financial provider.
Switching to ethical banking is a great way to give your money an ethical makeover
What is an ethical banking?
Ethical banks, also known as sustainable banks, are banks whose business model is designed around making sure they have no negative impact on the environment or society. Therefore, meaning that they have environmentally and socially conscious rules and policies in place determining where they will invest your money. This might involve withholding money from industries or companies whose practice is against the ethical code of the bank (e.g. companies that conduct animal testing, take part in the arms trade, bomb–making or trade in fur).
Ethical banks also take positive action on a number of causes including:
- Investing in renewable energy research
- Supporting eco-friendly start-up businesses
- Helping poorer communities by financing affordable housing
- An increased level of transparency – so that you can see where and how your money is being used
Banks depend on our money to fund their investments. Switching to ethical banking will help to create a system that works in our interests and make positive steps for the environment, local communities, animal and human rights.
Which banks are considered ‘ethical’?
Move Your Money is a great resource to help you become a better–informed customer. In addition, Ethical Consumer has developed an ethical current account guide where they investigate, score and rank the ethical and environmental record of 29 current accounts. They are calling for big banks to adopt clear policies to avoid lending to “problem sectors” such as coal and tobacco, and provide full transparency about who they lend to and why.
|Best Buy Ethical Banks||Worst Rated Banks|
|Clydesdale||Bank of Ireland (Post Office)|
|Nationwide Building Society||M&S Money|
|Metro Bank||Tesco Bank|
|Yorkshire Bank||Virgin Money|
Triodos is at the top of the Ethical Consumer leaderboard for ethical banking. Further, Triodos is uniquely transparent about everything and has an extensive ethical investment policy; meaning that they only invest in businesses and charities that provide social or ecological benefit. Monzo is also named a “best buy” for current accounts.
As well being clear about how they operate, and how their product works, Monzo also helps you to better manage your finances by notifying you instantly of any changes to your account balance, suggesting cheaper alternatives and allowing you to set specific savings goals with their savings pots function.
Should I Switch to an Ethical Bank?
Switching to an ethical banking allows you to make a stand against unethical banks. You can also wrack up that good karma knowing that your money will not be used for negative purposes in the future. You have nothing to lose, the difference between the highest-paying savings accounts and the rates from responsible savings institutions is closer than ever. Therefore, you won’t be losing out by saving with a provider that only invests your money in environmentally and socially beneficial projects. Furthermore, you can see from the table above, which financial providers are leading the charge for ethical current accounts.
Additionally, Triodos, Ecology and Charity Bank top the ethical league table for Cash ISAs. Ecology is also the most ethical mortgage provider on the market according to Ethical Consumer’s list of ethical mortgages. Another option for ethically minded consumers is credit unions. Credit unions run as financial co-operatives owned and run by their members helping those on low-incomes get affordable credit.
How to Switch Banks?
If you’re considering switching your current account to a more ethical banking provider, you’ll be pleased to know that the Current Account Switch Service makes switching your current account simple, reliable and stress-free. Therefore, to start your switch, ask your new bank or building society to move your old account. Then, the switching process is handled by your new bank. Your bank will let you know when the switch is complete.
You can also earn money in the process of switching banks. Read my guide to bank switching bonuses to find out more about claiming a bonus as you switch banks.
Do you want to make the world a better place? And to do what is right for society and the environment? If this is the case, make sure you switch to a bank that isn’t investing in negative practices. Moreover, to to do more switch to an ethical energy provider that only uses 100% renewable energy! Do you have any more questions about ethical banking? Ask them in the comments below.