Our guide outlines which savings accounts could be the best ethical options for you.
Last Updated: January 2021
Ethical banks are those whose business models are designed around making sure they have no negative impact on the environment or on society.
This means that they will have certain rules and policies in place determining where they will invest your money, if you choose to bank with them.
Almost all ethical banks don’t lend to industries such as tobacco or weapons manufacturers, but others also have more positive lending policies in place, such as targeting the renewables sector.
You may be a little wary of putting your money in smaller, not-on-the-high-street banks. However, banks and building societies with ethical policies came out of the financial crisis much better than the larger high street banks as they did not get involved with the risky business practices that put so many banks under pressure. In addition, the Financial Services Compensation Scheme (FSCS) protects assets up to £85,000 held in banks in the UK.
There aren’t many ethical banks that operate in the UK, especially that offer current account services. Below we highlight a few of these:
In addition to the banks listed above which provide current accounts, there are several more institutions which offer ethical savings accounts. Again, we’ve focused on those with an explicit ethical or sustainable objective:
Ecology Building Society
Building Society with an environmental focus
The money in the Ecology Building Society's savings accounts are used for environmental projects in the UK. Since 1981 they've lent to over 3,000 projects, and in 2018 they lent £38.4 million to support 255 sustainable properties and projects. The Ecology Building Society also offers mortgages for environmentally- friendly homes.
UK Bank entirely owned by charitable organisations and similar
Charity Bank is entirely owned by charitable foundations, trusts and social purpose organisations. All of the money invested with Charity Bank helps support charitable activities and social enterprises.
Since 2002, Charity Bank has lent almost £300 million to nearly 1,000 organisations across the UK, in a number of different and varied sectors.
A Dutch bank which lends only to organisations that have a positive social or environmental impact
Triodos opened its doors for a current account in the UK in 2017, and is probably one of the most sophisticated ethical banks in the country. A Dutch firm, it only lends to organisations that ‘make a positive impact on people’s lives, protect the planet, or build strong communities’.
It focuses its activities across three overarching themes: Environmental, Cultural and Social. Together, these cover a broad range of sectors – from renewable energy, organic farming and social housing through to retail, charities and education. They publish details of every organisation they lend to.
One of the best known UK ethical banks with a consumer led ethical policy
Co-op is probably the best known ethical bank in the UK, and despite some controversies over the past several years, still remains a top choice with a strong ethical policy and good reviews from customers and the industry alike.
As a cooperative, their ethical policy is shaped by their consumers, which you can view here. The Co-op's main premise is to promote human rights and equality, and promote economic and social development in Britain; designed around seven goals which include- for example- promoting human rights and equality, protecting the environment and animal welfare.
Ethical investment co-operative lending to fairtrade businesses
Shared Interest is different to the above organisations in that it is an ethical investment co-operative that pools lenders money to provide loans and credit to primarily fair trade businesses. The company aims to alleviate poverty by helping people in remote and disadvantaged communities to trade and earn a living.
You can open an account with as little as £100. Your money is then pooled with the other investors which spreads the risk of the loans. In practice, the interest earned on your loans is very little- at present the interest rate is 0.25% per year. There is also a risk of losing your capital if a lot of loans aren’t repaid at once. Since Shared Interest was established in 1990, however, this has never happened.
Shared Interest provides a lot of information on how your money goes to help people in disadvantaged situations, with a lot of material each quarter and lots of content on their website. Last year, for example, the money invested helped make a positive impact on the lives of 470,000 individuals.