Ethical banking

January 2nd, 2013 BY Mat Conway | 1 Comment

As the climate and the environment become hotter topics, people are worrying more about how they spend their hard earned money. You may buy energy efficient light bulbs or spend that little bit more to purchase organic food. Some people will try and be as ethical as possible in their day to day lives. But what about what your money is doing while you’re not spending it?

Ethical products aren’t just things you buy but also things you subscribe to. One particular area that many are not aware about is what your money is doing while it is sitting in a bank or building society account earning interest.

Your bank or building society will invest your money so that it can make a profit and pay the interest on your account, they can invest ethically but more often that not they don’t.

Avoid the big banks

This isn’t a definitive statement but a study by Friends of the Earth fournd HSBC, The Royal Bank of Scotland and Netwest, three of the largest banks in the UK, to be unethical in several criteria with them funding projects of both politically and environmentally dubious nature. Banks are known to invest in companies that supply arms to dictatorial regimes (and hence indirectly supporting them) as well as funding environmentally damaging projects such as oil pipelines and mines.

The Royal Bank of Scotland actively funds drilling rigs, pipelines and oil tankers. Following research released in March of this year Friends of the Earth Scotland’s Chief Executive, Duncan McLaren, said: “Through its investments, Scotland’s leading bank has been unmasked for helping to fuel climate change. The polluting emissions RBS are responsible for now even dwarf those of Scotland as a nation. It’s time for RBS to stop profiting from pollution.”

Better options are building societies such as Nationwide and Portman, or in one of the few banks that have outlined a clear ethical policy.

The Co-op bank introduced their ethical policy back in 1992 and in 2005 they turned down almost £10m of funding on ethical grounds. Of this 25% was over concerns for global climate change and 20% was for worries over animal welfare. They refuse to invest in any business involved in the manufacture or transfer of armaments to oppressive regimes, or in any equipment that can be used in the violation of human rights. They will not support any government or business that doesn’t uphold basic human rights within their spheres of influence. They support fair trade and actively avoid investing in companies that will contribute to global warming (such as the extraction or production of fossil fuels).

Triodos, a bank based in the Netherlands with branches in Belgium, the UK and Spain goes one step further. It only finances companies that they feel will benefit society and the environment. They are the only bank in the UK that provide a full list of all the loans the bank has made each year so that everyone can see how their money is being used.

Environmentally friendly

If you are looking for something actively green how about the Ecological building society? Any money saved with them will go towards supporting sustainable development, and they only give out mortgages to those who are going to make their homes eco-friendly.

Looking for a mortgage? Giraffe offer a carbon offset mortgage. For the fixed term of the lending they will buy up the equivalent amount of carbon credits to account for an average home’s CO2 production. This will reduce the number of credits in circulation stopping other companies from being able to purchase them.

Most of these ideals, especially concerning human rights and the arms trade, seem logical and even obvious things that should be done, so why don’t most banks practice them? Simple, profit. Banks are businesses and just like any other they are out to make money – your money may be doing a lot more harm than you think.

But even these banks can fail to live up to their own standards and at some point they will all do something that you, as an individual, will not be happy with. So if you want to be totally ethical with your money shove it under your mattress and pray for low inflation. Failing that think carefully about where you keep your money, research their background and choose a bank that invests ethically.

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