business corporate responsibility wealth

Which is the most ethical bank?

ethical-banking

As we’ve all learned over the years, in case there was any doubt, when we place our money in a bank it doesn’t stay in a vault somewhere. It goes out to play on the stock market, in loans and mortgages, in all manner of deals and agreements. Banks have always used their customers’ money, and expected their customers to ask no questions as long as they delivered the interest at the end of the quarter. (See this post on Darfur to see what can happen without an ethical investment policy.) What if we demanded more from our money?

Our banked money represents the power to invest, and what we invest in shapes our future. I don’t know about you, but I want my money to be put into things that I want more of, like renewable energy or Fairtrade initiatives, and not into things I want less of, like oil companies or airlines.

So where’s the best place to put our money?

The Co-operative Bank
There is only really one high street bank in the UK with an ethical policy, and that’s the Co-operative. The bank has its roots in the co-operative movement that started in the 19th century as a way of creating a fairer model of capitalism through shared ownership. The bank remains committed to those ideals, and members all receive a share of the profits.

A detailed ethical policy means no investment goes to companies involved in the arms trade, fossil fuels, animal testing, and so on. Because customers vote every year on how their money is used, new concerns are regularly included, such as genetic modification or climate change. The bank has turned away over 900 million pounds worth of loan applications since it adopted its ethical policy in 1992.

Because the Co-operative is not on the stock market, it is considered more stable than other banks. However, an ill-advised merger with Britannia has caused problems, and plans to expand the bank have stalled. The Co-op is far from perfect, but it remains Britain’s only high street bank with an ethical policy.

Smile
Smile is an online subsidiary of the Co-op, so all of the above is true of Smile accounts too. Smile was the first internet bank launched in the UK. Because it doesn’t support a network of branches, it has lower running costs, and these are passed on to customers in lower charges and higher rates.

Nationwide
One alternative I can think of to a Co-op current account is the Nationwide. As a building society, it is mutually owned by its members and is therefore free from the turbulence of the stock markets. Lending is much more closely tied to deposits, as it is with all the building societies, but most of them do not have current accounts in their portfolio of services. How your money is invested is not up for discussion, but at least it’s for the benefit of the customers, rather than shareholders.

Handelsbanken
A bank with an very different philosophy, Handelsbanken has been running in Britain since 1982 and now has 150 branches. But they don’t advertise, so you may never have heard of them. What’s different is that each branch operates independently, so it’s a de-centralised, old-fashioned business model that makes a real effort to be locally relevant. If you want a bank that cares about relating personally to its customers, this may be the one to go for – it consistently comes top of polls for customer satisfaction.

What makes it an ethical choice is that this Swedish bank knows its customers, and therefore lends far more sensibly than many other banks. You won’t visit a branch and be solicited with cheap loans, which the Co-op is not shy of doing. This is all about responsible lending and wise investing. You can get a current account, and online banking.

Reliance Bank
Another little-known alternative is Reliance Bank, which is owned and operated entirely by the Salvation Army. It’s been going for over 120 years and aims to “stand out as a bank with a Christian and ethical conscience”. Its ethical policies are quite old school – no business with those who profit from alcohol or tobacco, pornography or the arms trade, but no mention of fossil fuels or climate change. Reliance is small, with only one actual branch (in central London), but it does nevertheless offer a full current account service.

There’s much more choice in the area of savings and investments. Here are just a few.

Triodos
One bank of note for its ethics is Triodos. Not only do Triodos have an ethical policy, they declare every loan they make, a uniquely transparent measure. Rather than doing as little harm as possible, Triodos set out to use money for good, and will only finance businesses that “add cultural value and benefit people and the environment”. They are best known for investing in wind power in the 1980s, long before it was a fashionable cause.

At present Triodos do not offer personal current accounts, so you’ll still have to hold one of those elsewhere. Their services include business and charity accounts, and personal savings. The current accounts are on their way apparently, so I’ll update this post when they’re available.

The Charity Bank
The Charity Bank’s speciality is lending to charities. Many banks will not loan to charities, as they lack a business plan that would guarantee a return. This means that charities sometimes struggle to finance important projects or growth strategies. The Charity Bank will make loans to charities, and then work with them to ensure their long-term sustainability.

Charities are being squeezed at the moment by the credit crisis, and as people re-consider their giving. That makes the Charity Bank’s mission a particularly important one right now.

Shared Interest
I’ve written about Shared Interest before, as I like their business model and they’re a friendly bunch of people. Basically, they have pooled the savings of their 8,500 members, and used the money to provide capital for the Fairtrade movement. This is very much a social investment as well as a financial one, putting your savings at the disposal of those working to alleviate poverty. Their site is here, and the blog here.

Ecology Building Society
This unusual savings and lendings group was set up in 1981 by ten people each putting £500 into a central fund. It was created to serve those who were having trouble getting mortgages on properties that needed extensive renovation, or those seeking to fund self-build or low-impact housing. It’s mission remains the same, issuing mortgages for building projects that will improve the environment.

66 comments

  1. Have you heard of Zopa? They’re not strictly ethical as such, but they gather individual investors monies and lend them out to other individuals- it’s an online thing too so low overheads and they’re quite a “friendly” seeming bunch too. We got a loan from them for our clothes swap business.

  2. The Co-operative bank should not be considered an ethical bank, as the company is just as exploitative as any of the other major retailers.

    They may be the only high street bank in the UK with an ethical policy, but walk into any co-op supermarket and you will see that they do not practice what they preach. Any industry that chooses to profit from the exploitation of others excludes themselves from holding any ethical position. Look at the magazine section, as a for instance, and you will find porn. Is that now considered ethically acceptable? Exploitation along gender lines is no less bad than exploitation on race, religion or colour. It damages the potential of all participants within our society, from the youngest child garnering their opinions and perceptions from the images on magazine covers, to the mature individuals who now struggle to see that there is harm being perpetrated by this offensive media.

    Then look at the lack of fair-trade, or fair trade alternatives, that are available. A smattering offering of chocolate and coffee, little else. If they were serious in this agenda, the Co-Operative would be leading the way.

    1. It’s a matter of degrees. There’s plenty about the Co-operative that I don’t like – the flyers advertising loans for new cars or a holiday are irresponsible for example – but I have to keep my money somewhere. I have an account with the Cooperative because it’s better than the others, and if I was holding out for a perfect bank I’d have a lot of cash stuffed in that mattress!

      The Co-operative supermarket is different from the bank and has its own policies, but I think you’ll find they are actually leading on Fairtrade. They stock more fairtrade lines than anyone else, including hard to find items like fairtrade certified wine. There aren’t nearly enough fairtrade alternatives available, but the Coop is often the first to stock them when they are. Again, still lots more to do, but better than most.

    2. if the co-op were exclusively fair trade hardly anyone would shop there because of the prices. they’re already expensive compared to supermarkets, but fair trade stuff is the least affordable. it would be great if they exclusively stocked it but if they did that the stores would be few and far between. what ethical products they do sell get to the average consumer because of the other ones, if they didn’t sell what other companies did they wouldn’t sell much at all. as it is their range is the best and they do a bit more every year, it takes time to successfully sell every item imaginable at twice the price.

      1. If the Co-op only sold fairtrade items it wouldn’t be a supermarket. There’s a growing range of fairtrade alternatives, but not enough to fill a shop of any size. In fact, in Luton we have a fairtrade shop opposite the co-op, so you can do a proper comparison. The fairtrade shop is smaller than my front room and half empty.

    3. I am a former employee of Co-operative Retail (supermarkets) having worked there through my university studies and never saw any pornography stocked in our store (excluding the Sun’s Page 3 Girls and FHM magazine). What is more the fairtrade range was always far more extensive than at any other supermarkets I visited.

      But this isn’t really the point. The point is: The banking division (not supermarkets) has an ethical policy which means your savings aren’t supporting arms dealing, sweatshops or animal testing (for example). I find this good and I don’t bank with other banks because they can’t promise this.

    4. I entirely agree. The Co-op Bank along with the Co-op Retail have been on the Ethical Consumer Boycott list in the past. Currently the Bank is focusing on the buy to let market which is a very short-term and unwise thing to do as helping new landlords secure properties simply reduces the number of properties for others to buy as homes and drives up prices in areas of housing shortage. The average price of buy to lets is under £100,000 which is also where first time buyers usually need to look but this is just causing a problem.

      The Co-op Bank refuses to accept this is an unethical practice and are in denial about the consequences of assisting this market to grow. Mind you, they also told me that they do not practice fractional reserve lending whereby they create money they do not have as credit to lend out as mortgages and loans (standard practice in the banking industry internationally unfortunately) but I have since found out from employees at the bank that they DO practice fractional reserve lending. The long-term consequences of this is to fuel inflation and especially property price inflation in more buoyant times.

      Rather than “ethical” the best I’d describe the Co-op Bank as is the “lesser evil”. I really wish Triodos or the Ecology BS offered current accounts!

      1. I have banked with the CooP and Smile in the past as I liked the idea of them being ‘ethical’. However I found them to be just as grasping and as ruthless as the other banks with pretty poor customer service. They hide behind their ‘ethical’ policies such as not being involved in the arms trade and the like but there are still pleanty of unsavioury industries they can be involved in. My personal experiences with these two banks is that they are no better than the other big high street banks.

        1. i have banked with the coop for over 30 yrs the only time they were unhelpful or grasping was after the financial crash. otherwise they have always tried to help me when times have been hard.

    1. Maybe – I don’t have the resources to write that one, mainly because I don’t live there, but also because it’s more complex. Banking in the UK is reduced to four or five really big players. The US has lots of smaller or local banks, as well as the big ones. That’s a much safer system in many ways, but also harder to research.

      Good luck finding one!

    1. Does anyone know of any bank whos fatcats are not taking bonuses? I am ready to take action to close my account with the RBS who i have been with for 40years! enough is enough

      1. I bank with the co-op, as it is mutually owned rather than answering to shareholders. It’s a different model that doesn’t require the aggressive gambling that other banks engage in.

  3. What’s wrong with loans for cars or holidays (not that I take out loans for either)? If the Co-op doeesn’t offer them to people, someone else will.

    1. Nothing as such, it’s just that many people have a debt problem, and suggesting they take out a loan and go on holiday isn’t particularly responsible. Debt for stuff we need, for investment or for appreciating assets is okay, but the holiday loans or the ‘pay for Christmas’ flyers that turn up in banks are a little predatory.

      1. Surely that is then about how the bank assess each loan application – it would obnly be unethical if they lent withour due regard to a person’s ability to repay that loan.

        1. Yes, the responsibility is with the bank, but banks also create a culture around debt that can lead people into trouble if their circumstances change. Credit has been too easy to come by in recent years.

  4. Ethical Consumer is a magazine which reveiws huge range consumer products from every day items like fruit drinks and clothing to banks and insurance on ethical criteria. Excellent articles and analysis, tables comparing companies an a range of ethical criteria etc etc. See http://www.ethicalconsumer.org You’ll get best descripitions on ethical matters from here.

  5. I don’t think anyone has mentioned Reliance Bank (web address, from memory, http://www.reliancebankltd.co.uk ). They offer a full range of accounts: cheque, loans, mortgages, etc. As they are owned by the Sally Army, I doubt if there are any corpulent felines at the helm. The profits go to support the charitable activities of the SA. There are no branches, but you get a paying-in book to use (free) at any one of the major banks, and you can withdraw £500 a day by card, and there is.internet banking, so it is quite a practical proposition.

    Also, there is whiteaway Laidlaw in Manchester. This is owned by Manchester Building Society, so mutually owned, ultimately. Their main selling point is that you get a proper account manager to talk to, rather than an operative on the end of a computer terminal linked to HQ.

    Leeds and Norwich and Peterborough Building Societies may also still offer current accounts if you want to go down the mutual route. None of the above retail porn, so far as I am aware.

    1. Reliance Bank don’t sell porn but their owner (sally army) has a very uncharitable (pun intended) record regarding lesbian, gay, bisexual and trans people (inc many recorded instances of refusing aid to destitute LGBT people). That may not matter to some people but I wouldn’t use a bank whose profits go to the SA.

      FWIW, I have my main account with Nationwide and a savings acount with Yorkshire Building Society. They are not perfect but have no shareholders and provide a decent online service, so I never have to set foot in their premises, which suits me – they don’t get a chance to try to flog me things I don’t want!

  6. Dear All
    It is not true that the Co-op do not finance in animal testing. They have admitted to me that they do finance animal testing for research, drugs etc.
    They are very political with the truth on their website as they state that they do not finance animal testing in household products and cosmetics.
    They do not mentione medicines or research at all.
    Surely that is pulling the wool over consumers/clients eyes.
    Debbie

    1. And in that single instance, Debra, you have convinced me to give my money to Santander, where’ll I’ll get £100 and 5% on my current account cash. From yours and the comments above, I have suddenly realised that The Co-op is a brand, nothing more. There is no real ethical substance to their brand of “ethical business”. Screw it. I won’t feel guilty for taking as much as I can from the banks in personal gains. I’ve had enough of sacrificing my own welfare, and in this current state of affairs I have to take care of myself as best I can.

      For sure, a part of me wants to be convinced by someone that hey, come on, don’t lose hope. There’s still reason to best as ethical as possible. But, another part of me says, if I put my money in Co-Op I stand to get back £10 over a year, if I put my money in Santander, I get £225. And money is short, so I know where I want to put it…

      1. Lots of Co-op bashing on this thread. Again, it’s not a perfect bank, but I do think it’s streets ahead of anyone else. For all the gaps in its ethical policy, it is alone in actually having an ethical policy. What you do with your money is up to you, but don’t let perfection be the enemy of good.

    2. Absolutely and if I’d known that I would have closed my account years ago. I ended up ceasing having an account with them after I complained about unfair bank charges. In retaliation they shut my accounts with no written notice, entirely a breach of the terms and conditions of the account, and passed me onto their debt collection department as I had a tiny overdraft to pay. They were extremely rude and aggressive and they started adding horrendous charges to the account very quickly because I wouldn’t deal with them. In the end I got everything overturned by the FOS but I would never touch the Co-op Bank again. They are not an ethical company whatsoever.

    1. Try a building society that offers current accounts like Nationwide. Building societies make the bulk of their money through mortgage lending. Banks lend money they don’t even have through the fractional reserve system.

  7. A very useful article, thank you. I’m currently a member of Triodos in Spain and have been extremely pleased with the philosophy and the service. I’m about to come to the UK for post-graduate studies, and was severely disappointed that Triodos there doesn’t offer current accounts, as does Triodos in Spain (“Cuenta corriente”). I wonder why? Your article gives good insight into alternatives.

    However, I was wondering what exactly the difference is between Smile and The Co-operative Bank. If one is a subsidiary of the other, what does it offer that the other doesn’t, besides a somewhat sleeker website?

    1. Smile is an entirely online bank, so it has no branches and offers a more limited number of services. Otherwise, I’m not sure why the Co-operative set up a rival brand for themselves!

      And yes, I’ve been disappointed that Triodos doesn’t have current accounts.

    1. Hi Suki,

      Did you end up finding anything?

      I am looking into ethical banking in Aus myself at the moment. Bank mecu and MCU Sustainable Banking both seem like good choices (for example for fixed term deposits starting from 3 months, you can have interest rates of 4.5-4.65%), also there is the Greater Building Society (Bonus Saver account: 4.75% interest).

      If you found some other good options, please do share!

      Cheers,
      Tina

  8. Credit Unions were mentioned to me recently as a bank alternative, there is some kind of campaign in America to encourage people to switch to Credit Unions and it is having some influence here in the UK apparently. I know virtually nothing about Crredit Unions, could they be a suitable alternative to banks?

  9. I like many reading this are appalled by the recent lack of social responsibility being demonstrated in UK banks. After losing the majority of my families life savings in a ‘off shore” ETF during the credit crisis. I’ve made it my mission, too not only educate myself regarding managing my finances and savings, but to banking with a moral conscious.

    So my current account is with the co-operative, however there service has been shockingly bad. let me give you some Examples: 1) they don’t process card payments over the week ends, my old bank did. 2) despite a weekly salary of over £1000 I cant get an overdraft. With all this being said, there is no better alliterative, if you find one please enlighten us all.

    1. Will do. I’m still hoping for some new players in the UK banking sector. So far we’ve had Metro Bank, which is tiny and only in London, and Virgin Money taking over Northern Rock. I’m not aware of any ethical policies among those two, so the Co-op remains the best of a somewhat unsatisfactory market.

      Politicians are talking this week about how to open up the market to new players, so I’m optimistic that there will be some more options in the coming years.

        1. It does and is far more ethical than the Co-op Bank, as is the Ecology Building Society, but regretfully neither offer current account facilities.

          Instead of the Co-op Bank I would recommend a building society which offers current accounts such as Nationwide. Some credit unions are beginning to offer current accounts but they charge a weekly or monthly fee for this.

  10. The Co-op are not at all ethical; I should know, I worked for them. They treat staff appallingly and are just as ruthless as any other bank, the only difference is the Co-op profess to be ethical to the public, but behind closed doors it’s a different story.

    1. “The Coop” in this context is The Cooperative Bank Ltd, a subsidiary of The Cooperative Financial Services, which is part of The Cooperative Group, based in Manchester. There are many other Cooperative societies operating in the UK, not part of the Cooperative Group, for example The Cooperative Energy (part of the Midcounties Cooperative Society, based in Oxford) and it is important that however bad Sofia’s experience as an employee of the Cooperative Bank may be, people realize that such criticisms can only apply to the one particular part of the movement where they have been generated, not the movement as a whole.

      Secondly, however badly they may or may not treat their employees, this does not depart from their professed ethical stance, which is quite specifically related to how they apply their funds, not to how they treat their employees (or indeed, their customers). In fact, I do not see why ruthlessness is necessarily incompatible with having an ethical policy, although you might argue that that policy is thereby wanting.

      At least Coop Bank won’t engage in money laundering transactions with Mexican cartels, unlike at least one other British bank.

      Allen
      Sent from my BlackBerry® smartphone

      1. Agreed. Every company get let individuals down, and the Co-op is not perfect, but it remains the only bank with an ethical policy.

        There’s been lots of bashing of the Co-op on this thread, but seriously, if you think there’s a more ethical bank in the UK, do let us know.

        1. Just considering leaving smile as the customer service there is the worst I have ever encountered. It’s not that they tell you the wrong thing (which they also do), but worst of all they just ignore you. They are very polite and all that but for whatever reasons their customer service is just utterly ineffective which makes them impossible to bank with.

          A real shame that there is no real competition out there for ethical day-to-day banking so it looks as though it will have to be a Building Society for me, but frankly smile (no idea re Coop bank) is the worst I have ever been with.

          1. i had one of the best experiences with Smile. I guess the banks like any businesses can not please everyone

      2. But they do offer offshore banking services in the Channel Islands and Isle of Man so will help you to hide your money from the tax man 🙂

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  13. Hi, I found this a really useful read. Do you have any books that you could recommend, which focus solely on British banks and their national/ international activities?

    Thanks!
    S

  14. Just had a look and Triodos are planning to launch a personal current account in the UK in early 2016. Great news, right? They’re even better than Co-op banking you say?

  15. Nationwide Building Society is far from being ethical and is not genuinely mutual. At election time they use a “Quick Vote” trick so that members will vote in accordance with their wishes. They don’t allow any resolutions that members may submit to be presented for a vote.

    They claim that the society is owned by its members but in reality and unlike plcs the directors cannot be held to account.

    The directors give themselves massive pay increases every year without fail even though performance for members is poor compared to other societies, all of which are smaller, and worse than banks that have shareholders to pay.

    1. I am stuck between Nationwide and Reliance (I am leaving Co-op finally die to their closure of Palestinian solidarity accounts without good explanation when questioned). I like Reliance as it invests positively but am concerned abut the anti-LGBT stuff and the operating hours are short weekdays only (can use ibank but not for queries I imagine). I’m concerned about the comments on Nationwide and feel it’s an ethical by default not design approach. I’d like to go for Triodos but their current account keeps getting moved back (later 2017 now I think) and if I leave it that long to close my Co-op accounts the impact will be less (as longer since their closure of the palestinian solidarity accounts)

      1. I’m still waiting on those Triodos current accounts too! But then I’d rather they took the time to set them up properly than rush it through and risk it going wrong.

        I’m still with the Co-op for now. I’ll probably move to Triodos when it’s ready, but I don’t want to move twice.

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