I’m currently looking into moving my money to the most ethical and eco-friendly bank operating in the UK. I’ve been with my current bank for almost 30 years but it’s time to look into the unethical / unsustainable businesses each bank invests in. Banks have, in the recent past, been linked to the arms trade, bomb making, oil and gas industries and tar sands mining, amongst other things. I don’t support these things so why would I want my money to be used to support them?
It should be easy to find out what your bank invests in and who they give loans to; for transparency you’d think the information would be on their website. If this information is in fact on their websites the majority of them hide it very well.
What is an Ethical Bank?
This is a difficult thing to answer because it depends on what your own values are. What’s more important to you? The environment, the financing of arms manufacturers, human rights, animal rights, dodgy tax practices, political lobbying…
All of the listed things are important and it’s a good idea to look at each company as a whole. With this website being about eco-friendly practises my primary concern is of course to the environment but I will take everything into account. There is definitely a massive improvement in carbon emission reporting on banking websites and the majority of them now have a ‘sustainability’ page and modern slavery statement. What is more difficult is finding out whether a company donates to political parties or invests in environmentally destructive businesses. Who they invest in, or fund, is the primary reason a bank could be classed as unethical. I’ve listed the least ethical banks in the UK towards the end of this article.
As far as I’m concerned the less transparent a website is the more likely it’s trying to hide something.
The Difference between Banks and Building Societies
Firstly, let’s talk about the difference between banks and building societies because building societies are classed as ethical by The Ethical Consumer, writing for The Guardian…
“(Building societies) are judged to be ethical by virtue of the fact that strict regulations limit the amount of money building societies can invest in certain industries. The other plus point is that building societies profits are ploughed back into the business for the benefit of borrowers and savers rather than shareholders.” – The Guardian
- A bank is a business, and works for its shareholders.
- A building society works for their customers.
“Because banks are listed on the stock market, they are businesses and therefore work in the favour of those who invest in them, specifically their shareholders. Building societies, however, are not commercial businesses, they are ‘mutual institutions’ – owned by, and working for, their customers.
As a result, building societies’ interest rates generally tend to be a lot higher than banks as they are not required to pay dividends to any shareholders.” – Finance Monthly
I’ve already learnt something, and I’m embarrassed that at my advanced years I didn’t know the difference between them.
Credit Unions
We haven’t mentioned credit unions yet but for some people these might be a better option than a bank or a building society.
What is a credit union?
- A credit union is a form of co-operative. It’s “run by the members, for the members”.
- Credit unions are not-for-profit, and are formed by people who have something in common.
- Credit unions offer a range of savings accounts, current accounts and loans to members, much like traditional banks and building societies
To join a Credit Union you normally have to either live locally, be part of a local group or have a certain employer. i.e. have something in common with them. Use https://www.findyourcreditunion.co.uk/ to find out the Credit Union options available to you and your circ*mstances. Having looked into it my current circ*mstances show that I don’t personally have any options to join a credit union.
Most Ethical Banks UK?
When doing research about the most ethical banks in the UK there are a few that crop up quite a lot – The Co-operative Bank, Triodos Bank and Charity Bank.
Co-operative Bank
What they say about themselves
“We’re proud to be the only UK high street bank with a customer-led Ethical Policy. Our customers know their money will be kept safe and not be used in a way that conflicts with their values and ethics.”
What others say about them
“The first example of ethical banking in the UK was the Co-operative which, while still an option as an ethical UK high street bank, arguably ceased to be ethical when it became majority-owned by US hedge funds in 2013.” – gocompare
Triodos Bank
What they say about themselves
“We publish details of every organisation we finance on our website, so you can see for yourself how your money is delivering positive change for people and planet”
What others say about them
“Ethical banks such as (…) Triodos Bank, are pioneers for sustainable banking that gives customers what they need whilst also giving back to the people and planet.” – The Good Shopping Guide
Charity Bank
What they say about themselves
“Charity Bank is a savings and loans bank with a mission to use money for good. We use the money our savers entrust to us to make loans to charities, social enterprises and organisations with charitable purposes.
Our community of borrowers, savers, shareholders and staff are all working towards one goal – helping to create lasting social change in our communities.”
What others say about them
“if you save with Charity Bank, your money will be used to fund its loans, which go to charities and ethical projects.
While the interest you get may not be the most competitive, you can be happy in the knowledge that your money is being invested in social improvement projects and initiatives.” – gocompare
At this point I feel like Triodos and Charity Bank are the better 2 options, but of course there are always some drawbacks and all 3 banks have something going against them.
- Co-operative Bank is majority-owned by US hedge funds.
- Triodos Bank current accounts cost £3 per month.
- Charity Bank doesn’t offer current accounts.
It’s also worth considering Monzo and Starling as well. Both, like Triodos, are app-based banks meaning their carbon footprint is much lower due to having no actual branches and are completely paperless.
Ethical Building Societies UK
As stated at the beginning of the article building societies can be classed as ethical due to restrictions on how much money they can invest in certain industries. However you would have to look into whether their ethics align with your own values.
When doing research Nationwide,Cumberland and Ecology building societies are often mentioned as ethical alternatives to banks. Ecology Building Society only offers savings accounts and mortgages, but they are certainly worth looking into if you aren’t looking for a new current account.
- You may have to be close to a local branch in order to join a building society.
- If you have a mortgage with them (or transfer your mortgage to them) you can normally gain access to all their products.
Most Ethical Banks & Building Societies in the UK
There are certain things I’m looking for when determining which is the most ethical bank in the UK. I’m only one person so I unfortunately don’t have the time or resources to fully investigate everything I’d like to (such as who a company invests in, who donates to political parties etc). However as I said before, the more transparent a website is the less they have to hide, and the more willing they are to be held accountable. Being honest about things that need improvement and the measures being taken to make those improvements is far better than not providing any information whatsoever.
With that in mind there are 4 things I’m focussing on, all of which, I believe, are not too much to ask for as a potential customer.
Ethical Bank Basics
Sustainability Page (or statement) – A page talking about how the bank itself is aiming to be sustainable, even if that’s about conserving energy and water in their offices.
Modern Slavery Statement – It’s rare to find a website in the UK that does not have a modern slavery statement somewhere on their website, but it shouldn’t be hard to find. If it is too difficult to find I can’t give them credit for having one.
Carbon Emission & Reduction Target – A self-proclaimed ethical bank or building society should absolutely have information regarding their current carbon emissions and the date they hope to achieve net zero or carbon neutrality.
Investment Transparency – A good example of being completely transparent about who and what is being invested in is this statement on the front page of the Triodos website. “We publish details of every organisation we finance on our website, so you can see for yourself how your money is delivering positive change for people and planet”.
All of these things should be relatively easy to find on a website. If they are not in the main menu (they rarely are), take a look at the links at the foot of the website, this is the most common place to find the information. Not all websites have specific pages for each of the above. If I’ve found the information somewhere on their website (and it wasn’t too hard to find) then they have been given a check mark.
Please note:
Being transparent doesn’t mean you are ethical. Having a statement about modern slavery or a page about sustainability doesn’t mean that there aren’t things that should be improved. The Co-operative bank is a prime example of this. On paper they seem very ethical and their website talks about their ethical values, but being majority owned by US Hedge Funds really doesn’t sit well with me. Whereas Nationwide being a building society
Least Ethical Banks UK
Let’s begin with a startling fact from bankingonclimatechaos.org, followed by information from their in depth fossil fuel financing report 2023.
- Fossil fuel financing from the world’s 60 largest banks has reached USD $5.5 trillion in the seven years since the adoption of the Paris Agreement (04/11/16), with $669 billion in fossil fuel financing in 2022 alone.
The following figures are all in USD and relate to bank financing from 2016 to 2022 in companies that are involved in the extraction, transportation, transmission, distribution, combustion, trade, or storage of any fossil fuels or fossil-based electricity. The full report from the banking on climate change website includes the largest 60 banks globally, but I’ve focussed on the banks we see and know in the UK. I’ve included how they rank globally as well. Barclays is the 7th worst bank for fossil fuel financing in the world for this time period.
UK banks – fossil fuel financing
This can be broken down further…
My recommendation? Try to move away from these 5 banks.
Best Ethical & Green Banks UK
It’s quite clear that Triodos is the most environmentally friendly bank and the most ethical bank currently operating in the UK especially for those looking for a current account. Triodos is very transparent on their website and is open about every business and company they invest in. Triodos ‘only finance companies that focus on people, the environment or culture.’ Also being an app based bank their carbon footprint is already much lower than many of the others. Monzo seems to come a close second.
Ecology Building Society is a great option if you’re looking for a mortgage or savings account.
Update 07/07/22:
I wanted to sign up with Triodos, however £3 a month does add up. And I currently don’t have a full time job and am pinching pennies. However, as they themselves state, that’s only the price of a coffee and most banks fund free accounts with hidden costs and high overdraft charges. The biggest drawback for me was they don’t appear to offer cheque books. (Nationwide do and I have to pay my rent by cheque!) I ended up moving from HSBC to Nationwide Building Society, and I have no complaints so far.
If you find any incorrect information in this article please let me know. If a website has been updated and now the information is much easier to find then please let me know where it is so I can update this article for everyone. Thank you.
Changing who you bank with really makes a difference but so does where you buy your food. Check out the most ethical UK supermarkets.
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