Banking on your values

If money makes the world go round, then it also dictates which way it turns. And banks, by choosing where to invest their money, actively influence that direction. It follows, then, that our choice of bank is a choice about the world we want to live in.

75% of us in the UK still bank with one of the big four: Lloyds Group, Barclays, Natwest and HSBC (you can find out if your bank is a subsidiary of one of these here). Since these large institutions are the ones that finance the multinationals, they’re best placed to steer us towards a better future. Unfortunately, though, despite what we might tell our children, a bank’s purpose is not to keep our money safe, but to make more money for their investors. And that aim doesn’t always align with what’s best for us or our planet in the longterm.

“Since the 2015 Paris agreement, 35 of the world’s major private banks have provided a total of $2.7 trillion in lending and underwriting to the fossil fuel industry.”

Ethical Consumer, September 2020

But it’s not just their support for the fossil fuel industry that’s questionable. Extensive tax avoidance diminishes public spending. Powerful lobbying bolsters their own interests. Exorbitant executive pay exacerbates inequality. Investments in mines support human rights abuse and the displacement of indigenous communities. From funding the arms trade and nuclear weapons, to encouraging animal testing, unsustainable palm oil plantations and deforestation, the list of their wrongdoings is long, utterly disheartening and, despite a common lack of transparency, increasingly well documented.

Happily, it’s easy to bank with a clear conscience by switching to a more ethical bank. Regulations dictate that the process should take no more than seven working days, and your new bank will do all the work for you, including transferring direct debits and standing orders. And if any money is mistakenly paid into your old account, they’ll make sure it’s moved across to your new one – a service that continues for at least three years.

The consistent winner in the ethical banking world – for individuals as well as businesses – is Triodos Bank. Offering both current and savings accounts, they’re uniquely transparent, providing an annual list of all their loans that allows me to learn about the companies, charities and social enterprises my money is helping to support, including several on my own doorstep. The result is a sense of value, community and hope far beyond anything on offer from a high street bank.

It’s true that the more ethical banks might not offer the best interest rates or the lowest charges. But I was naive not to recognise that there’s always a price to pay, regardless of which bank I choose. At least in banking with Triodos, I can take control of that cost (which, in these days of low interest rates across the board, is minimal anyway), and not ask the planet and others on it to pay that price for me.

And you needn’t be a multi-millionaire to make a difference. In general terms, a bank is allowed to lend up to nine times the amount they hold on deposit, enormously amplifying the impact of your savings. Your choice really can improve the world: when Barclays was boycotted over its role in apartheid South Africa, its share of the student market fell by 15%, enough to contribute to lasting change in the region.

We shape the world every time we spend. That’s equally true when we save, or simply trust a bank to manage our day-to-day finances. With over $300 trillion in global capital markets, it’s our financial institutions that will make or break this little world, and either drive the change we so urgently need, or cling to the business-as-usual path to environmental destruction.

For an excellent overview of the role of finance in shaping the world, watch this short film. And then ask yourself if you’re funding the world you want. If the answer’s no, then it’s time to switch.

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(Another alternative is to switch to a building society. Being ‘mutual institutions’, they’re owned by, and work for, their customers rather than their shareholders. Strict regulations limit the amount of money they can invest in certain industries, and profits are ploughed back into the business for the benefit of borrowers, rather than being paid out as dividends.)