A version of this article was first published on Ethical Unicorn.
Switching your bank account, alongside supporting the divestment movement and getting involved with changing international law, is one of the most powerful ways to have a positive individual impact.
Many of the issues we’re facing are, whether it be climate breakdown or systemic injustice, are moral issues to us. We hope that people and corporations will realise their wrongs and change their ways because it is the right thing to do. Unfortunately, this is not quite the landscape we’re in right now so, until further notice, we need to strategise and act effectively. And one of the most important assets we can utilise is our money.
We can often think of this in terms of the power of how and what we consume, but our money holds power simply in how we choose to store it. Banks are some of the biggest investors in fossil fuels, nuclear weapons, and the arms trade, and they’re using our money to do it. So choosing wisely when it comes to banking is choosing what we want our money to fund.
Last year Ethical Consumer came out with new data on the best banking options for multiple situations, comparing UK banks on a variety of measures including environmental policy, workers’ rights and political involvement. I recently went through their research to create this updated, in-depth guide on choosing an ethical bank.
This is what I found.
Current accounts
A current account is a standard bank account that lets you access everyday services like receiving money and paying bills. It’s therefore also an account that you’ll use very frequently.
When choosing where to open a current account, ask the following questions:
Is it an ethical investor?
The bank should be transparent about where it invests your money.
Does it pay its fair share of tax?
Tax avoidance is a big issue in the banking sector, with many banks operating subsidiaries out of known tax havens such as Switzerland and Luxembourg.
Is it financing climate change?
All of the big banks have extensive investments in fossil fuels, including the most damaging ones like tar sands and ultra-deep sea drilling. The single biggest funder of fossil fuel industries in the world is JP Morgan Chase, according to a report published in March 2019 by Rainforest Action Network. (The banking giant led by progressive-seeming Jamie Dimon has poured almost $196 billion into fossil fuels since the Paris Agreement—almost a third more than the second place, Wells Fargo.) Ethical Consumer’s feature on fracking also details which major banks are involved with fracking companies. The most involved are Barclays and HSBC, both of which provide banking services to fracking companies and also own portions of several of them.
Is it funding the arms trade?
War on Want released a report detailing the relationship between UK financial institutions and companies that sell weapons and military equipment to countries such as Israel, Saudi Arabia and Bahrain (read more on how we need to stop selling weapons to Saudi Arabia here). All of the largest banks hold significant shares in these companies or provide loans to them. Additionally: Old Mutual (part owns Kent Reliance), ICICI Bank, Santander, Lloyds Banking Group (Bank of Scotland, Birmingham Midshires, Halifax, Lloyds, Scottish Widows), Danske Bank, TSB Bank, Citibank, HSBC (HSBC, First Direct, part owns M&S Money), Bank of Ireland (Post Office), and RBS Group (Coutts, Ulster Bank, RBS, NatWest) all are directly involved in the financing of the nuclear weapons industry.
Fortunately, Ethical Consumer’s report also highlighted specific banks that actively boycott unethical investments and lending, with many instead turning to impact investing, selecting investments and lending to companies that create a positive impact socially or environmentally.
Companies to avoid
These big banks consistently come bottom of Ethical Consumer’s rankings tables based on the criteria above:
JPMorgan Chase
Wells Fargo
HSBC (including First Direct and M&S bank)
RBS (including NatWest and Ulster Bank)
Lloyds (including Halifax and Bank of Scotland)
Barclays
Santander
Companies to support
Triodos Bank consistently ranks as one of the world’s leading sustainable and ethical banks. It has strict minimum standards for companies that it invests in, directly addressing the alcohol, gambling, p*rnography, tobacco, and weapons industries, as well as involvement in conflict minerals and human or labour rights abuses. Triodos has been recognised by the International Campaign to Abolish Nuclear Weapons for this policy, excluding all companies involved in arms-related activities.
Triodos also has a specific environment section of its minimum standards detailing its approach to biodiversity, deforestation, energy, genetic engineering, hazardous substances and contamination, natural resources and mining, and water. In 2017, 38% of its loans went to environmental projects, including renewable energy, organic agriculture, and environmental technology. It also has strict policies on animal testing, factory farming, fisheries, fur and speciality leather.
Finally, Triodos is well known for its transparency. Beyond its clear policy for its investments and lending, it publishes a full list of the companies in which it holds shares and how it voted in their AGMs, making it an industry-leading responsible investor.
After Triodos, Ethical Consumer’s top ranking options were:
Cumberland Building Society
Nationwide Building Society
The app-based banks Monzo, Revolut, and Starling.
To find recommendations for bank accounts outside of the UK, check this list of ethical banks.
Savings accounts
A savings account is a deposit account held at a bank or other financial institution that earns a small amount of money each month, helping you save money over time. When you deposit your money with that institution they then loan it out to other people, charging a slightly higher interest rate on the loan than the interest they pay you, allowing them to earn money from the difference.
When choosing a savings account, ask the following questions:
Is it an ethical investor?
Make sure that your chosen brand is clear about how it will invest your money, keep an eye out for ethical investment policies.
Is it a mutual?
Is the organisation owned by and run for the benefit of its members rather than short-term financial gain? Savings accounts that are by mutual organisations, such as building societies, usually operate more ethically.
Is it financing climate change?
Is it funding the arms trade?
Is the company a likely tax avoider?
Avoid banks who lack robust tax policies. In 2016 Ecology Building Society became the first building society to receive the Fair Tax Mark. However, most of the banking sector is still shrouded in secrecy and aggressive tax avoidance. In terms of taxes:
Worst rating: Virgin Money, Danske Bank, Bank of Ireland, Santander, Lloyds Banking Group, Citigroup, HSBC, Tesco Bank, and TSB.
Middle rating: Handelsbanken, RBS, Coutts, NatWest, Ulster Bank, and Barclays.
Best rating: Triodos, The Co-operative Bank, Charity Bank, Clydesdale Bank, Yorkshire Bank, ICICI Bank, Al Rayan Bank, Sainsbury’s Bank, and Metro Bank and the following building societies: Chelsea, Ecology, Norwich & Peterborough, Nationwide, Coventry, Cumberland, Kent Reliance, Leeds, Newcastle, Principality, West Bromwich, Skipton, Yorkshire.
Companies to avoid
You may notice a repeating pattern here, but the big five banks that dominate the savings market are, of course, the bottom of the score tables, and best to avoid:
HSBC
RBS
Barclays
Lloyds
Santander
Companies to support
The savings sector has three organisations who scored highly with Ethical Consumer due to their ethical and transparent lending policies and their alternative ethos. These are
Ecology Building Society
Triodos
Charity Bank
Ecology Building Society focuses its lending on projects concerned with carbon reductions and environmental impact, with its ethical lending policy prioritising sustainable housing practices, sustainable lifestyles, sustainable economic activity, and other similar ventures.
Triodos offers financial services to a range of projects including organic food and farming businesses, renewable energy enterprises, recycling companies and nature conservation projects.
Charity Bank only lends to charities, social enterprises or organisations with a charitable purpose. Every year it publishes a report with details of all the borrowers it supported with loans and the projects that this money had helped to fund.
Triodos and Charity Bank also both publicly disclose their investments, making them more transparent and accountable.
See more ethical investment options here.
Also by Francesca:
Has Capsule Wardrobe Become A Way To Sell More Stuff? What to Do Instead
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