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 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.
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.
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.
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.
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.
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.