Easy Swap: These Challenger Banks Invest Your Money Ethically
Welcome to our new Easy Swap series, a lowdown of brands that are innovating the way we live by providing more sustainable and ethical products that are better for people and the planet.
The Covid-19 pandemic has seen our ethical priorities shift, as outlined in The Ethical Consumer’s Pandemic Report. Whilst we’ve been shopping more locally and reducing energy consumption, our use of public transport has reduced. And the effect of the pandemic on our finances means that more sustainable products and brands might now be out of reach.
The good news is that switching your bank is a powerful action that doesn’t require you to spend anything extra or change your lifestyle to have a major ethical impact. Here’s what you need to know to make an easy, ethical swap.
What makes a bank unethical?
Let’s start by going back to basics. Banks make a profit by lending out deposits made by account holders, essentially putting your money to use when you don’t need it. Banks create money in the economy by making loans, and some of this comes back to account holders in the form of interest. Simple enough, right?
If your money is in a savings account or ISA, a significant portion of it will be loaned to businesses around the world. Unfortunately, you don’t get to decide where your money goes or who benefits, that’s for the bank to decide. So unless your bank makes an ethical commitment, it’s highly likely that your money is being used to support corporations and business practices that you don’t approve of.
Many well-known banks invest our money into unethical and non-sustainable businesses, even financing fossil fuels and nuclear weapons. The Banking On Climate Change 2020 Report found that global banks have provided $2.7 trillion in financing for fossil fuels since the 2015 Paris Agreement. And that’s your money.
If these practices don’t align with your values, it’s time to give some thought into who you bank with. We can all make a positive impact with our savings, no matter how small, and you don’t have to be clued up on investments or stocks and shares to make good things happen.
When it comes to banking, the small actions of many can make a huge difference. Between 2018-2019 11 million adults in the UK had an ISA (Individual Savings Account), with an average savings amount of £6,049. If all 11 million people moved their hard-earned savings to an ethical ISA or savings account, that’s a potential £66.5bn rerouted into more ethical financing.
What is ethical banking?
Ethical banks offer competitive interest rates for current accounts, savings accounts and ISAs, just like the well-known high street banks. But they differ because they champion a fairer and more sustainable economy and society.
Ethical banks actively discourage the funding of fossil fuels and nuclear weapons, and instead loan money to more sustainable businesses and smaller companies they shared values with. Client screening is important part of the lending process.
Ethical banks will often support community projects and aim to foster healthy, local communities.
So which bank should I switch to?
1. Triodos
Triodos Bank is one of the ‘most sustainable banks in the world’. Its mission is to make its customers’ money work harder for positive social, environmental and cultural change to improve lives and build strong communities. Pretty epic!
Triodos believes that banks should be open and publish the details of every organisation they lend to. The bank does this because it wants to show their customers what impact their money is having. Triodos currently has 61,000 UK customers and manages more than £1billion in total assets.
Bevis Watts, CEO of Triodos Bank UK, said, “Anyone looking to live a greener lifestyle should consider that switching banks is one of the most impactful changes you can make. You can choose to prevent your money from financing fossil fuels, plastic packaging or arms, and support sustainable initiatives instead – thereby making a real difference in the world.”
Triodos has an excellent range of savings accounts and ISAs and offer Easy Access, Regular Savings, Variable rate cash ISAs, Junior Cash ISA and Ethical Stocks and Shares ISA.
Visit triodos.co.uk.
2. Charity Bank
Charity Bank is 100% owned by charitable foundations, trusts and social purpose investors. It proudly proclaims, ‘if you're looking for a bank that will help you to put your money where your values are, you're in the right place.’
When customers save with Charity Bank, their money is used to provide loans to charities and social enterprises. Savings become part of a wider social mission that could be used to build affordable homes or launch renewable energy projects. What’s not to like?
Charity Bank has a great range of savings accounts on offer. Find out more information by visiting charitybank.org.
3. The Co-operative Bank
The Co-operative Bank is the only UK high street bank that’s guided by a customer-led Ethical Policy. The Ethical Policy details who The Co-op will not provide banking services to and they screen all businesses who apply for their accounts to ensure they comply with their ethical guidelines.
The Co-op says, ‘We believe we have a duty to use our voice and stand up for causes that matter to you.’
That said, it is important to note that the bank is no longer owned by The Co-operative Group, and is now majority hedge-fund owned. Despite its Ethical Policy and commitment to make community change, The Co-operative Bank is currently 12% owned by Invesco, an investment company that’s linked to nuclear weapon producers.
The Co-operative Bank has a range of savings accounts and ISAs available with competitive interest rates. Find out more by visiting co-operativebank.co.uk/savings.
So if your 2021 goals are to save big and live a more ethical and sustainable life, switching banks could be one of the best ways you make an impact. So why not let your hard-earned money work harder?
Please note: the articles and information made available on raisethe.bar are provided for information and educational purposes only and do not constitute financial advice.
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