How to choose an ethical bank
If you’re casting about for a sustainable switch that feels important, practical and is achievable in a day, here it is: change your bank.
Sounds like a faff, why should I switch bank?
If you bank with one of the major UK institutions, chances are your money is being used to fund the fossil fuel industry and maybe even the arms industry. Here’s where you can check how unethical your bank is and find a more ethical alternative. But to give you a few examples (courtesy of bank.green):
HSBC and Lloyds are two of the 60 biggest funders of fossil fuels in the world
Barclays is the no. 1 in Europe for fossil fuel financing
Banking is a huge opportunity to do good in society. Switching to a responsible provider is a strong statement against unethical practices and a guarantee that your money is being used to make life better: whether it’s lending to charities and social enterprises, funding green energy or protecting the financial wellbeing of vulnerable people.
Is my bank really that bad?
As with anything in this space, there’s often a ton of greenwashing going on. A quick scan through the major banks’ sustainability pages shows vague ideas, half-arsed promises and even a focus on helping us, the customer, reduce our footprint. Like we’re the problem!
Keep an eye out for anything vague like tree planting or carbon offsetting in your name. But the big one is banks who fail to declare who they invest in or loan money to.
So, what’s the alternative?
Luckily, there are loads. Ethical Consumer magazine recently rated Ecology Building Society and Triodos Bank as the best of the bunch. Starling states they do not invest or lend to the oil, weapon or tobacco industries. Meanwhile, the Co-operative Bank claims to be carbon neutral and zero waste.
How should I choose my new bank?
Obviously, I’m no financial advisor, but what I have done is gathered a couple of useful resources which are a good place to start:
Best ethical banks in the UK compared for features and services
More responsible banking options
As you do your research, keep a lookout for:
information on how the bank is helping reduce emissions in line with the international targets
evidence the bank is measuring carbon impacts of the businesses they lend to and helping them reduce that impact
data on where the bank invests and who it dishes out loans to
The B Corp Impact Assessment tool recommends choosing a bank with one of the following credentials:
CDFI certified (or national equivalent)
B Corp certified
Member of the Global Alliance for Banking on Values
Cooperative or credit union
Local bank committed to serving the community
Independently owned
It’s easy to find lists of certified banks or check if the bank you’re eying up is certified.
Anything else I should know?
You might find that compared to traditional high street banks, ethical banks charge a monthly fee. Their argument is that ‘free’ accounts are actually funded by hidden fees and high overdraft rates which hit the most vulnerable customers. In their eyes, a small monthly fee (Triodos charge £3 at time of writing) is a fairer way to do business. Indeed, most of the new ethical banks have much lower overdraft fees.
How long will it take me?
Switching banks is a faff, I’ll give you that. All told, I think I spent about three hours checking out different banks, making the decision, then making the switch. The good news is the seven-day switch policy in the UK means that the banks handle everything, including transferring over your direct debits. Just remember to:
update your invoice template
keep your old account open until old invoices have been paid
include a note to your regular clients the first time you send them an updated invoice
I’d love to hear your thoughts on this. Have you switched? Are you planning to but something is holding you back? Chat to me on LinkedIn.