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I’ve previously written about ethical investing, but I want to give you a broad overview of ethical banking, because there’s more to it than just ethical investing. You may have come across the idea of switching your utilities to ‘greener’ products and services; you can also do the same when it comes to choosing a banking provider.
The good news is that most are covered by the Financial Services Compensation Scheme, however, do check that before you switch. You also need to be aware of something called ‘greenwashing’, which is where a product or service is portrayed through ads and campaigns as being environmentally beneficial, when in fact they are only token gestures and not necessarily as ethical as you might expect.
The problem with ethical banking is that there isn’t really any consensus as to what makes something sustainable or ethical. When it comes to ethical investing, the practices and values that you consider to be ethical might not be the same from someone else’s perspective.
Take Amazon for example – some people have quite strong opinions when it comes to their ethical practices and so may choose not to invest with them for this reason.
Ethical Savings Accounts
What makes a savings account ethical comes down to how any given bank uses your money. Typically, a bank will invest your money to make a profit or lend the money elsewhere. Ultimately, a bank is a business and needs to make money to survive. By using deposits to make more, they are making sure that our money is there and accessible whenever we need it.
From an ethical perspective, consider whether you would be happy for your money to be stored with a bank that was investing in the fossil fuel industry, nuclear weapons, using tax avoidance methods and failing to address the gender pay gap. If you would rather not bank with such an institution, you need to do your research, including watching out for greenwashing.
Ethical Banking — What to Look for?
Do some research into what they are investing their money in and look out for whether they pay their fair share of tax. Also look at who is running the company and their attitude towards women and ethnic minorities.
A truly ethical bank will not invest in anything that may be detrimental to the environment, or finance weaponry or anything which may impact upon countries affected by war. You also won’t find them in tax havens like Cayman Islands or Bermuda, Jersey, Mauritius etc.
Ethical Banking Examples
When it comes to finding ethical savings accounts, here are a few you can check out, among others.
Triodos — Ethical investing and banking is at the very core of Triodos Bank, and it will only finance organisations that focus on people, environment or culture. In fact, it’s contactless Mastercard is even made from renewable plant-based materials.
Nationwide — this well-known UK high-street bank operates as a mutual, which means it is held accountable to its members and run for the benefit of its members, rather than shareholders.
Disruptor Banks like Starling and Monzo — Starling’s ethics statement highlights the fact that it does not provide services to organisations that promote harmful behaviour such as weaponry or tobacco. Starling is also a founding member of the TechZero Charter, and has pledged to reach net zero emissions by 2050.
With a focus on transparency and social impact rather than environmental ethics, Monzo Bank has a low environmental footprint due to the fact they don’t have physical branches.
Currently in development, mobile banking app Novus will help you contribute to causes you care about to help the planet each time you make a payment, without it costing you any money. I’ve joined their waiting list while it’s in development, and you can too if you wish.
Ethical Investing
As mentioned above, I’ve talked about ethical investing on episode 38 of the podcast. You can check that out here, as it goes into much more detail.
When it comes to researching which companies to invest with, look at the different brokers/platforms available to you and the ethical funds they offer. There will be a collection of companies which the broker deems to be ethical, but to be sure you agree with them, make sure you do your due diligence.
Ethical Investing Organisations
Triodos Bank also offers ethical investing. They are pricier to invest with, but you might be happier with what they offer.
Other organisations you might consider include Fidelity, Vanguard, Hargreaves Landsdown, Moneybox, and Plum. Each of these companies manage ethical-type investment funds which you can get involved in. But above all, make sure you do your research to ensure you understand the underlying investments with them. Look closely at the key facts document and what exactly is held within those funds to make sure it’s in alignment with your values.
You could also look at crowdfunding investment platforms like Crowdcube and Seedrs, and see which kinds of businesses are asking for investment. However, these can be riskier than the more established companies out there, so do your research, and don’t invest all of your money in one company. You might find businesses with values you strongly identify with, like healthcare.
I recently got involved with a company which focuses on giving women more ethical choice when it comes to menstrual cycle products. For example, using plastic-free resources and contributing to charities to help reduce period poverty. To me, that’s a good, ethical investment. But I didn’t invest all my money because it’s relatively new — and there’s always a risk I could lose my money. (Although of course, I want them to do well!)
In Summary
Bottom line – beware of greenwashing. Do plenty of research to make sure you’re investing in a fund that isn’t just paying lip service to ethical investing, but actually justifying the companies that are included. It’s possible that not all funds will be transparent with which companies are included on the basis of protection against competitors. So if this makes you feel uncomfortable, don’t invest in that fund.
For more information on ethical investing and terminology, go along and listen to episode 38 on the Money Medicine Clinic podcast. You can also download my free eBook, which explains the different types of terminology used.
So go ahead, do your research, and celebrate the fact that your money can do good in the world. By 2025, 65% of the country’s wealth is predicted to be in the hands of women. What an amazing opportunity for us to have this kind of power.
I believe this is the future. And the more we get involved, the earlier we can change the status quo — so that things can move in a better direction for the world, the environment, and everyone in it.
Take care for now,
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