Sustainable banking is on the rise but it can be hard to know exactly what to look out for when making the switch. Thankfully consumers have never had a better opportunity to move their money away from the failed big banks. Marc Peridis provides us with the definitive guide to choosing a sustainable bank.
Just over 3 years ago, I left behind my commercial interior design studio to devote myself to building and running a gallery dedicated to sustainability. I quickly decided that the ethos of this new found mission should, inevitably, trickle into my personal life as well. Time to “walk the talk” I thought.
So I gave my lifestyle a complete overhaul. Already a devout vegetarian, I traded-in the gym for yoga, replaced taxi-rides with bike rides, began recycling obsessively, re-designed my flat using only sustainable furniture, and relentlessly preached the benefits of meditation and conscious consumerism to anyone who would listen.
Yet there was one area I had avoided; one that would probably be the most effective in making a significant impact on the current state of the world (short of running off to Greece to devote my life to the plight of arriving migrants of course).
This area was responsible banking.
It’s no surprise that a Google search for the words “ethical bank UK” yields 48 million entries in less than 0.5 seconds, and that 2.4 million Britons have made the switch in the past 7 years*.
The motivations are clear:
The dishonest, criminal and irresponsible behaviours of the financial sector have caused a massive destabilisation of the world economy via the crisis of 2008, resulting in significant increases in unemployment rates and substantial cuts to social services (a side-effect of generous taxpayer-financed bail-outs). As a result, the standard of living of middle and lower classes has decreased and worldwide economic disparity has increased. Today, the wealth of the top 1% of the world population is equivalent to that of the bottom 99%.
This divide is also fuelled by the world’s gargantuan tax evasion problem. Today, £5.6 trillion, 8% of the world’s economy, is currently held in tax-free havens. Major banks such as HSBC, UBS and many more, have been scolded for being major contributors to this problematic situation.
Additionally, the significant involvement of high street banks in fossil fuels, as well as their investment in other socially and environmentally disastrous industries such as oil, coal, gas and fracking is driving irreversible climate change and environmental destruction. The total assets of the UK’s 5 biggest banks in these industries currently amounts to over £66bn.
Adding fuel to the fire, (no pun intended) steep spending in political lobbying by banks has caused governments to lean their policies towards the city rather than the general population, resulting in the financial sector being dangerously and disproportionately influential.
Now If you are simply looking to rid yourself of the guilt of belonging to this over-arching “evil and exploitative system”, that can easily be achieved by moving your money from your current “big bad bank” to one declaring sustainable ethos on their website or manifesto. Ie: Close your account at Barclays and open one at COOP bank. Simple.
However, to make a real difference and ensure your money truly is working for the good of humanity it will take a bit more digging. It took me a year of sustainable banking research and practice to realise things were not always as they seemed.
Lets go back to these 48 million entries, shall we?
Most sources will generally recommend the three following banks:
- Charity Bank
- Triodos Bank
- Coop bank.
All three banks boast sustainable ethos and come highly recommended for supporting only ethical enterprises and projects. A very quick scan, however, and you’ll realise that only COOP bank offers current accounts and debit cards. While, initially, that might make them seem the obvious first choice, further investigation provides some surprisingly deterring information.
In 2013, COOP bank, the first to have pioneered ethical banking in the UK, was fined £113,300 by the Financial Services Authority for delaying complaints about Payment Protection Insurance (PPI). They were also found to be heavily involved in political lobbying in support of the labour party and have also belonged to the British Bankers Association (BBA) lobbying against effective banking regulation in the UK and EU. They more recently raised concerns when they were rescued by American hedge fund Perry Capital, leaving critics wondering whether they could remain ethical at all in light of this new relationship. Scandal erupted shortly after, when they were accused of closing the accounts of UK organisations supporting Palestinian charities; Perry Capital, their backer, is said to have ties to pro-Israeli advocacy group “The Israel Project”.
While all these issues may seem like “small change” in comparison to the massive destabilisation caused by the criminal activities of larger UK banks, they proved sufficient to discourage an enthusiastic sustainability fan such as myself.
So I chose Triodos bank, feeling slightly underwhelmed by the fact that the sacrifice of a debit card meant I would need to keep another account elsewhere, one which would only hold a small amount of money to cover day-to-day expenses.
I adapted to the slight inconvenience, confident my money was being put to good use, until I became aware of the bank’s ties to the Royal Bank of Scotland. Triodos, I found out, is not a clearing bank. Therefore it had partnered with RBS (the bank which most closely matched its values at the time of opening in the UK) through which all payments, incoming and outgoing, would be cleared. No big deal… Other than the fact that RBS is among the most damaging and unethical banks in the UK, possibly in the world. The simple thought that my new “sustainable” banking practise would benefit them (even if only slightly) was untenable.
So I realised I needed to investigate further, desperate to find what I was yearning for: a real sustainable solution that could work for me. So I sought-out some more reliable sources of information and found Move Your Money, an independent not-for-profit organisation that raises awareness about alternative financial institutions in the UK, and Ethical Consumer, an organisation providing resources required to make sustainable and ethical choices.
The two organisations work closely together; however Move Your Money has, in 2013, produced a fantastically useful and thoroughly detailed report evaluating more than 50 banks against 15 specific criteria on sustainability and ethics. While reading the report’s 205 pages triggered sensations similar to those I would probably encounter visiting a slaughterhouse as a vegetarian, it was a fascinating and very necessary read. I had finally found the level of detail I needed to make the right decision.
The report evaluates banks based on 15 criteria organised in 4 categories:
- Criminal activity and fines
- Tax havens
- Political lobbying
- Misleading advertising
- Customer complaints
- Ombudsman referrals
- Customer satisfaction survey
- Customer power
- Excessive directors’ remuneration
- Bonuses policy
- Women on the Board
Supporting the economy
- Too big to fail
- Risky behaviour
- Supports the real economy
For each criteria, the banks are classed in the category of best, worst, or middle.
Having access to this wealth of information led me to create a chart comparing 9 banks in two separate categories (see chart):
- 3 banks offering only savings accounts (Ecology banking society, Charity bank and Triodos)
- 5 banks offering current accounts and debit cards (Metrobank, Handelsbanken, Nationwide, Al Rayan bank and Coop bank.
- 1 major non-ethical bank (RBS) was included to serve as a marker of how most of us bank in the UK today.
I gave each bank a comparative score, awarding them 1 point when they scored ‘best’ in a criteria, 0 points when they scored ‘middle’, and -1 when they scored ‘worst’. The highest score possible was 15 and the lowest -15.
Of the three banks in the ‘savings only’ category, Ecology, a building society, has the best score (15), but their system is more complicated and slightly less modern than Triodos a “user-friendlier” option where everything can be done online (scoring 11). Ecology, however, doesn’t have the same unattractive links to RBS (which scored -13). Charity bank (scoring 11 as well) has a better track record than Triodos but requires longer notice than anyone else to withdraw funds (minimum 33 days).
Of the 5 banks offering current accounts and debit cards, Metro bank which doesn’t identify as an ethical bank but as a “friendly bank”, comes out on top with a score of 8. Handelsbanken, a German group boasting a unique model in which each branch is run independently, is another interesting choice that scored relatively well in the MYM study (7).
The downside to both of these options is that they do not invest solely in sustainable or ethical enterprises unlike COOP (scoring a mere 3) or Triodos, for instance. However, COOP ranks amongst the “worst” with regards to supporting the real economy, their percentage of loans vs assets being only 40.7% while Handelsbanken’s is 70.4%. So if the support of the real economy is truly important to you (as it is to me) the latter may be your best bet.
To truly bank sustainably, you will need to choose a bank from each of the two categories as none of the ones offering debit cards and current accounts ranks highly enough. The savings account can hold the bulk of your money, enabling you to support the real economy in sustainable and ethical ways while a responsible and friendly current account can handle your day-to-day transactions without supporting criminal activities that conflict with your personal ideals.
In the end, there are a myriad of options possible and each person’s choice will vary according to needs and values. Following this more detailed research, I have personally chosen to move my Triodos account to the Ecology BS and my small day-to-day account to Handelsbanken. Although Triodos plans to offer current accounts with debit cards in the next 12 months, they would need to drop their relationship with RBS to win my vote. This, I was told by them, would be too costly and inconvenient.
If you were to make no change at all, hopefully the simple awareness of this information will be a step in the right direction. But if you are keen to make the switch yet feel (understandably) discouraged by the lack of solid options, perhaps recalling the motivations stated above would be the nudge required to take this leap. In the words of George Bernard Shaw “just do what must be done. This may not be happiness, but it is greatness”.