Should I Switch To A More Ethical Bank Account?

 

• There are many things to consider when choosing a new current account, but ethics, unfortunately, does not always come top of the list. Many of us like to bemoan evil bankers, but few of us actually take the time to consider how ethical our bank is, and whether we have any concerns with certain banks that should be taken into account when we consider a switch.
• If you are someone who likes to do the right thing, who cares about people and the planet, and wants to contribute to making the world a better place rather than making it worse, every decision can be a minefield. But being informed about what banks do with your money can help you to make more ethical decisions when it comes to what you do with your hard earned cash.
• Of course, when choosing which company to bank with, you will be able to use Money Pug’s handy comparison service to discover the best deals and see exactly which financial products are available.  But we don’t want to neglect the morality of the situation. To help you begin your journey towards more ethical banking, we have put together this guide to inform you about what financial institutions are doing with your money and to help you decide which bank you wish to go with – or which you definitely want to avoid.

---

What Should I Look For When Choosing a Bank Account?

• Is the company you are lodging your money with an ethical one?

You should make sure that any bank you are considering is clear about how it will invest your money. Keep an eye out for ethical investment policies.

• Does the bank pay its fair share of tax?

• Tax avoidance is a major issue in the banking industry. Many banks operate subsidiaries out of known tax havens such as Switzerland and Luxembourg. Consider looking for and choosing a company that is paying its fair share of tax.

---

What Should I Avoid When Choosing a Bank Account?

• Is the bank financing climate change?

Unfortunately, all the big banks have investments in fossil fuels, including the most damaging like tar sands and deep-sea drilling. You should also beware of placing your money with a bank who will invest in fracking.

• Is it investing in war, arms and the military?

Give peace a chance. Consider avoiding placing your money with a bank which invests in companies which sell arms and military equipment that is being used in unjust conflicts.

---

How Ethical Is My Bank?

•  Around 80% of current accounts are with the five big banks:

• HSBC (including First Direct Bank and M&S Bank)
• Lloyds (including Halifax and Bank of Scotland)
• RBS (including NatWest and Ulster Bank)
• Barclays
• Santander

Unfortunately, each of these banks scores low in terms of their ethics for a number of different reasons.

You may wish to consider banking elsewhere, if you have ethical concerns about banking with one of these large financial institutions.

---

Which Banks Are Most Ethical?

Which bank it might be best to go with will depend in part on your own ethical priorities.

Tax Avoidance:

• If tax avoidance is a button-pusher for you then you may like to know that the banks that are most ethical in this regard are: Triodos, ICICI, Clydesdale, Nationwide, Co-op, Metro Bank and Yorkshire Bank.

Unethical Investments:

When it comes to investments in which a bank is involved, choosing the most ethical option becomes a lot trickier, as not all financial institutions disclose all their investments.

Investments in various ethically abhorrent or murky, morally-grey areas are made every day by many major banks and financial institutions. By digging into where your money goes, you can make sure that your money is not going towards something you do not agree with.

One area of concern might be investment in an arms or military equipment company such as BAE Systems, Boeing or Lockheed Martin. Barclays, HSBC, Lloyds Bank and RBS have all made substantial loans to such companies, while Barclays, HSBC, Legal & General, Standard Life and Aviva all have shareholdings in the such companies.

Investment in fossil fuels and funding for climate change is another major area of concern. Unfortunately, all the main five banks invest in harmful industries and fossil fuel related practices.

Triodos is one of the most ethical banks in the UK, not only eschewing investment in fossil fuels and other climate change causing industries, but also actively investing in the alternatives – renewables, for example.

Triodos is also the best bank for transparency, and is the only commercial bank operating in the UK that provides an annual list of all the loans it has made. Triodos has an extensive ethical investment policy. So if you have ethical concerns about your current bank, Triodos may be top of the list when you are looking for an alternative.

---

Treatment of People:

Another concern for those looking for an ethical bank may be how well the bank in question treats those who work for them, and those who bank with them. If you think your bank is guilty of treating their employees unfairly, or that it engages in sharp or unethical practice when it comes to, for example, charging fees for going overdrawn, then it might be time to consider a change.

If you are thinking about switching banks, or getting a new current account, then as well as thinking about which bank offers the best deals, it could also be a good idea to consider which will be the most ethical choice.