The banking industry isn’t known to be the most environmentally aware sector. In the recent past, they have been linked to some pretty extreme controversies. This includes links from major high street banks to the arms trade, and tar sands mining. As bad as most banks might be, most of us are forced to engage with them in some way - we have to keep our money somewhere!
The Banking on Climate Chaos 2021 report finds that Barclays and HSBC are two of the worst fossil fuel financiers in Europe. Since the 2016 Paris Climate Change Agreement, big banks across the world have provided – brace yourself – $3.8 trillion to fossil fuel companies. Runaway funding for fossil fuel extraction and infrastructure fuels climate chaos and threatens the lives and livelihoods of millions.
So HSBC and Barclays are pretty bad, but which UK banks are the most sustainable? Well, we have researched for you. Triodos is our personal choice, but there are some good banks available for you in the UK.
Read on to find out which are the most ethical and sustainable banks available to you in the UK.
What is a Sustainable Bank?
Let’s start with some good news. Many banks are beginning to be more responsible.
This move towards sustainability is largely due to consumer pressure, with Ethical Consumer reporting that 64% of UK investors want their money to support sustainable and responsible% want businesses and 78 a fairer and more sustainable society.
When evaluating how ethical a bank is, there are two major areas to look at:
1. Investments – How does the bank invest its money?
The money that a bank invests into a project has consequences. If the bank funds bad things like fossil fuels then the bank is indirectly responsible for more environmental damage and pollution. If the bank funds sustainable practices then the bank helps those good sustainable things to happen.
Unfortunately, it is often really hard to find out what any bank actually invests their money in. We must therefore rely on the huge number of reports from civil society organisations like BankTrack and Campaign for Nuclear Disarmament that monitor banks’ financing for and investments in problematic industries.
2. Tax – Does it pay its fair share of tax?
Many banks rank as unsustainable because of their use of tax avoidance strategies. While these do not directly impact the environment, they do have a negative impact long term.
According to Ethical Consumers, the best fair tax rating was achieved by Triodos. Other banks like Cumberland, Monzo, Nationwide, Starling, Metro Bank, Handelsbanken, The Co-operative Bank, ICICI, Virgin Money, M&S also rank relatively highly.
Which banks should you definitely avoid?
All of the banks listed below score very poorly in terms of ethics and environmental action:
Barclays
HSBC – including First Direct (HSBC brand) and M&S Money (50% HSBC)
NatWest Group – including NatWest, RBS, and Coutts
Lloyds Banking Group – including Lloyds, Halifax, and the Bank of Scotland
Santander – including Carter Allen
Tesco
Citigroup
If you have an account, and especially if you have a pension, with any of the banks listed above you may like to consider moving your money to a bank that is more sustainable.
We know it can be a pain to change accounts, but where your money is held really does make a huge difference. Changing to an ethical bank is one of the most sustainable things you can do.
The Most Sustainable Banks in the UK
1. The Co-operative Bank
The Co-operative Bank has recently been awarded the Most Ethical Bank UK 2022 by CFI. Described as a purpose-driven financial institution which puts customers first and principles into action. The bank is celebrating 150 years of ethical banking and has strong commitments to the planet, its people, and the communities it serves.
The bank has been described as “beyond carbon neutral” for over 15 years running – every year it adds an additional offset of 10 percent to address historic emissions. We certainly applaud this.
Since 1998, they have reported our greenhouse gas (GHG) emissions and now offset their residual carbon emissions, plus an additional 10%, to address the impact that business activities have had in the past.
The bank recycled 70% of its operational waste in 2021 and reduced energy consumption by 18% year-on-year. It relies on renewable sources to power operations and promises that clients’ money will never be used to finance fossil fuels, oppressive regimes or unethical labour practices.
Are you part of The Co-operative bank, or would you consider it now? We would!
2. Triodos
Triodos was founded in the Netherlands in 1980. Having operated in the UK for 25 years, Triodos is now recognised as one of the most ethical and eco friendly banks available in the UK.
Like the Co-operative bank, Triodos have also won the CFI Most Ethical Bank Award (in 2021). The award was given for recognition of the bank’s work across areas of sustainability including organic food and farming, nature-based investing, social housing, and as early pioneers in the funding of the clean energy transition.
Triodos are a Certified B Corp and only finance companies that focus on people, the environment or culture. They are true pioneers in being fully transparent and publish details of each investment on their website. So far they have loaned £8.2 billion to projects across Europe to benefit people and the planet.
Bevis Watts, CEO of Triodos Bank UK, commented: “Sustainability is absolutely at the heart of Triodos Bank and we’re pleased to be recognised for how we’ve integrated these values throughout the organisation, and in our products and services for over 25 years. It is great to be recognised for offering fair and transparent banking that allows people’s money to be a force for good.”
3. Monzo
Monzo was a disrupter when it first came on the scene as an all digital bank in 2016. They have grown rapidly since then and now have more than 5 million customers.
Monzo is a branchless digital bank. They do have a number of offices around the world but their entire customer facing side only exists online.
This immediately lowers their carbon footprint when compared to high street banks as they do not have so many stores to power and so many workers commuting. As a growing business, Monzo does still have a large environmental footprint and contribute to climate change via carbon emissions.
To combat this, Monzo have published four environmental commitments:
Our goal is to reach net zero emissions as a business by the year 2030, and if we can get there sooner, we will. Net zero emissions means measuring the footprint of our entire value chain, reducing emissions as much as possible, and removing (not offsetting) the rest. Net zero companies aim to achieve for their own business what the world must accomplish to beat the climate crisis.
We measure and report on our carbon footprint in full, every year, and share the results publicly.
We have strong governance for our environmental work, with regular reporting to our executives and our board, both of which have representatives responsible for our climate policy.
We don’t invest in fossil fuel-based energy companies (or arms or tobacco companies). More information on how they invest customer deposits.
Monzo are serious about being sustainable and reports show that they do actually do what they say they will. They may not be as sustainable as the Co-operative bank or Triodos, but they are certainly heading in the right direction and offer a great sustainable alternative for those of you seeking a digital native bank.
Monzo, who is “making money work for everyone.”
4. Starling
Starling is a British bank founded in 2014 by Anne Boden. This made it the first UK bank ever to be founded by a woman. Like Monzo, they are an online-only bank.
Being a branchless bank but with some offices across the UK their carbon footprint is fairly low, particularly as they are paperless and run on renewable energy. Like Monzo, they also use the AWS servers in Dublin, which claim to be carbon neutral, but they are from Amazon so that claim might be worth some healthy scepticism.
In Starling’s ethics statement, they say that they do not provide services to organisations who promote harmful behaviours, such as arms manufacturers and tobacco companies. Starling lends to UK-based individuals and small businesses, and specifically states they don’t lend to companies involved in the extraction of fossil fuels.
Starling have recently stated that new and replacement debit cards will be made from 75% recycled PVC plastic and have pledged to become a Net Zero company, which would make them a good environmental bank. There is still some way to go, but they are certainly making good progress to being truly sustainable.
Do everything you used to do in a branch – on your phone.
Conclusion
While there are many bad banks, things are definitely improving. There are at least four very good, very sustainable, banks available for you here in the UK and even the high street banks are improving. Things are moving in the right direction.
If you do wish to change to a bank which is better for the environment, switching banks is now easier than ever, thanks to the Current Account Switch Service (CASS). With over 40 banks signed up to the service, CASS covers 99% of UK current accounts, allowing transferring direct debits, updating standing orders and changing the mortgage.
Will you be making the sustainable change or are you already part of a sustainable bank? Let us know on Instagram @ZeroSmartUK
