Now, more than ever, it is important that we bank ethically. As consumers and businesses, we can influence the ways that our finances work for good by choosing the right banks. What do we mean by choosing the right banks?
We want to look for banks that are handling our money carefully, are managing their business well, those that are transparent, and have independent certification.
How the bank uses your money
An ethical bank will be transparent about where they are investing our deposits and what they explicitly exclude from their investments.
As sustainability-minded businesses we want to be sure that fossil fuels, deforestation and poor labour practices are on the list of exclusions. From a moral standpoint we might also want to be sure our money is not used to fund wars, gambling, or tobacco. We want to see that the bank has policies on human rights abuses and environmental destruction. On the positive side, we do want our bank to invest in renewable energy, social housing, community projects, co-operatives and other low carbon or social impact activities.
It is worth digging a little deeper, beyond the PR and publicly published news items, to be sure that the bank and its investments are aligned with the Paris agreement on climate change.
Do they publish public net zero targets with short- and medium-term goals for financed emissions for their own operations and the organisations they invest in? Are they reporting against frameworks e.g. the UN Principles for Responsible Banking which outlines 6 principles to follow? Or the Transition Pathway Initiative Net Zero Standard for Banks (PDF) which uses the ten indicators of the Net Zero Banking Assessment Framework (NZABF)? Is there any evidence of a decarbonisation strategy with sector targets, fossil fuel phase-down or climate solution financing phase-up?
Governance and people
Ethical banking is about the internal processes of the bank and the external behaviour that impacts on society. Does the bank have transparent governance and pay structures? How does the bank make decisions on lending and investment? Do they treat their workers fairly? Are they paid a Living Wage (or above)? What are the working conditions like? Is their employment practice diverse, inclusive and equal? Do they avoid predatory and discriminatory practices?
Third party assessments
It can be useful to rely on third party assessments of the bank’s standards. Do they have membership or signatory status in a framework, e.g. the UN Principles for Responsible Banking that we mentioned earlier. Do they publish impact and sustainability reports with clear metrics and progress, and not just positive stories? Do they have B Corp status (which would require them to have an 80+ Impact score across governance, workers, community, environment and customers)? What is their score on the Good Shopping Guide which scores banks on Environment, People and Other?
Rank your bank
Use this checklist for a quick ranking of your current and potential banks:
- Do they publish an exclusion list? Y / N
- Do they publish a positive impact report or sector policy? Y / N
- Do they publish their financed emissions or climate targets? Y / N
- Are they signed up to at least one serious framework (UN PRB, NZABF, B Corp)? Y / N
- Can you see recent clear progress on climate, social impact and governance? Y / N
- Do their stated values match any controversies you can find (e.g. financing fossil fuels, arms or high risk projects)? Y / N
Bank ethically – business or personal
These principles apply whether you are looking for a personal bank account or a business bank account. They may require some research on your part but that is the only way that you can be sure that your money is being used for good.