The ethics of companies has become an increasingly important criteria for consumers to choose to do business with them.
In the banking industry, many people are abandoning their old banks and moving money to ethical banks. Consumers have discovered that they’re investing their money with banks that are funding arms research and manufacture, oil and gas, and more.
For a CIC, finding an ethical banking option is vital for ensuring that this service is aligned with the CICs core mission as well as the ethics of their sponsors, customers, and employees.
What is ethical banking?
Ethical banking is a form of banking that focuses on the responsible and sustainable allocation of capital to businesses, borrowers, and investments. It emphasizes ethical considerations such as corporate governance, environmental responsibility, and social justice when making decisions about investments. Ethical banks typically allocate funds to support activities that have positive economic, social, and environmental impacts.
As important as what ethical banks invest in is what ethical banks do not invest in, such as tar sands, companies that are environmentally irresponsible, and those that interact with dictatorships and oppressive countries.
What’s the difference between an ethical bank and a “building society” in the UK?
An ethical bank is a financial institution that operates in a way that aligns with certain ethical or socially responsible principles. This may include avoiding certain types of investments, such as those in the fossil fuel industry, and prioritizing lending to projects that have a positive social or environmental impact.
A building society is a type of financial institution that is owned by its members, rather than shareholders. Building societies typically focus on providing mortgages and savings accounts to individuals and communities. They also tend to pay higher interest rates, since they don’t have shareholders to pay.
While some building societies may have ethical policies in place, the main difference between an ethical bank and a building society is the type of institution and the types of services they offer, rather than their ethical practices.
A building society is not necessarily an ethical institution, but many are.
What are ethical bank basics?
Ethical banking refers to banking practices that take into account the social and environmental impact of the bank’s actions. Some basic principles of ethical banking include:
- Transparency: Ethical banks are open and transparent about their lending practices, and make sure that customers understand the terms of their loans.
- Fairness: Ethical banks aim to provide fair and responsible lending practices, and avoid predatory lending.
- Sustainability: Ethical banks consider the environmental and social impact of their investments and strive to support sustainable development.
- Community focus: Ethical banks often focus on serving the needs of underserved communities and promoting financial inclusion.
- Responsible investment: Ethical banks avoid investment in industries that harm the environment or society, such as tobacco, weapons, or fossil fuels.
- Customer protection: Ethical banks focus on providing protections and services to customers, such as education and financial planning, to help them make informed financial decisions.
What are some examples of ethical banks?
While there are many examples of ethical banks, there are some that come up most often when searching for an ethical bank:
- Triodos – “Triodos Bank is a leading expert in sustainable banking.
- Our mission is to make money work for positive change. We are more than a bank. We are a community. Get to know us and join the movement for change.” – https://www.triodos.co.uk/
- Co-operative – “We are guided by a unique, customer-led Ethical Policy that shapes how we do business. Our values and ethics have always been more than just words.” – https://www.co-operativebank.co.uk/
- Ecology Building Society – “ When you save with us, you know your money is being used to help build a more sustainable future. We’re a building society dedicated to improving the environment by supporting and promoting ecological building practices and sustainable communities.” – https://www.ecology.co.uk/
- Monzo – “Monzo is a socially responsible business. We invest customer deposits safely and ethically, we do not engage in any artificial tax planning, and we have a zero tolerance approach to modern slavery and human trafficking.” – https://monzo.com/
- Starling – “Starling Bank grew out of a desire to create a new kind of bank and to make banking more inclusive by putting customer needs first. For us, good business and ethics go hand in hand. We believe that businesses should be aware of their social, economic and environmental impact and their responsibilities to pursue the social good.” – https://www.starlingbank.com/
Need Help Choosing a Community Interest Bank Account?
If you would like advice on which ethical bank to choose, please contact KG Accountants. Our team will help you find the right ethical bank that meets your needs, both in services and in ethics, contact us today.
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