Avoid plastic, reduce emissions, recycle – these are some of the things that first come to mind when considering how to live more sustainably. While these are admirable habits, less attention has been given to how our individual choice of banks impacts the planet.
Traditional banking prioritizes profit over sustainability. As such, many banks invest their customers’ money into environmentally and socially destructive businesses. This promotes the use of fossil fuels, deforestation, weapon production and other harmful practices. According to a report of the Business and Sustainable Development Commission, ignoring this could end up costing global markets an estimated $30 trillion.
Significant international collaboration has reinforced the idea that a change in the way that banks operate is necessary for sustainability. An agreement drawn up by governments in 2015 set 17 Global Goals for Sustainable Development, including goals relating to climate change, clean energy and biodiversity. To achieve these aims, an estimated $7 trillion was found to be necessary, 85% of which needs to come from the private sector. Despite this, since this 2015 Paris Agreement, 35 of the world’s largest banks have collectively contributed $2.7 trillion to fossil fuel companies.
Some collective action against unethical banking has already been taken. For example, Divest Barclays is a campaign to boycott Barclays Bank in universities across the UK. Barclays is currently the biggest funder of fossil fuel infrastructure in Europe. The boycotting campaign has already gained significant ground, including in the Durham Student Union in 2020, when it passed a motion for an institutional boycott of Barclays, among a number of other student unions. The campaign hopes that these boycotts will lead Barclays to redirect these investments away from fossil fuels.
However, individual action also plays a significant role in the growth of ethical banking. Boycotts of unethical banks are not by themselves enough to produce sustainability in banking. An ethical banking alternative is necessary.
For that reason, here is a list of four possible ethical banks to consider switching to:
Seeking to provide banking ‘for individuals and organizations who want to change the world for the better’, Triodos invests its money into various altruistic causes, including human rights and green energy production. So far, they have invested £8.2 billion of loans to projects across Europe dedicated to social and environmental sustainability.
Triodos is uniquely devoted to being transparent about where customers’ money goes and has a whole page dedicated to this. Companies include First Solar Inc., a solar panel manufacturing company, and Millicomb, a telecommunications company that seeks to extend telecommunication services into developing countries.
Co-op Bank is the only high-street bank to have a customer-led Ethical Policy. It is perhaps no surprise then that social and environmental sustainability is at its heart.
The bank was awarded the best ESG rating of any high-street bank by Sustainalytics as a result of its extensive support for charities such as Amnesty International, Refuge and Centrepoint to support homeless young people. Switching to Co-op Bank is sure to make an impact on social sustainability projects.
Monzo is an online bank that offers ISA and savings accounts. Founded in 2015, Monzo is a modern bank that offers four areas of focus in their investment in ethical practice: accessibility, vulnerable customers, financial inclusion and environmental concerns.
While perhaps more transparency over its ethical policy could be put in place, Monzo is a significantly smaller bank than others, with only 33 employees. It hopes to be able to develop a more comprehensive ethical policy in the future.
Founded in 1840, Nationwide is typically associated with traditional high-street banking. However, in recent years it has made special efforts to find an ethical approach in its investment policy. It avoids investment in countries with a record of human rights abuses, weapons production and does not feature on any lists of fossil fuel donations.
It has also dedicated itself to a number of environmental projects, including the ‘greening of UK homes’. It intends that by 2030 ‘50% of homes in our mortgage books book will be EPC C or above’. Their student bank accounts offer an interest-free arranged overdraft of £1000 a year, a handy bonus for those interested.
By redirecting funds towards ethical banks such as these, individuals can propel the rise of ethical banking while also providing a financial incentive for banks to invest their money more sustainably.