Ethical banking

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With social issues and personal beliefs an integral part of everyday life, more people are choosing to align their financial activities with their individual ethics and beliefs. Whether it’s acting for climate change or championing animal rights, people may be surprised to discover that they can choose to bank ethically.

If you’re looking for a bank that has similar values to your own, you may want to consider ethical banking. It’s a way of ensuring that you’re not only living by your personal ethical values, but your bank is, too. Read on to find out more about what ethical banking is, which UK banks are the most ethical, the differences between traditional bank accounts and ethical accounts and why you might consider an ethical bank account.

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The rundown
  • Positive impact: Ethical banking means a financial institution is trying to make a positive impact on society
  • Beliefs: You might prefer to select your bank based on whether it aligns with your beliefs
  • Transparency: More people are choosing to bank ethically because it encourages transparency and helps build strong communities

What is ethical banking?

Ethical banks have fundamental principles which govern the way they invest their customers’ money. Ethical banking is when a financial institution or banking provider tries to positively impact society, the local community and/or the environment. What exactly they do to be an ethical bank will depend on the bank’s ethics, values and principles and the type of impact they want to make.

Ethical banks have policies in place that prevent them from investing in certain types of companies, such as companies that test on animals, employ child labour or make cigarettes. Ethical banks don’t just prevent money from going into these types of industry, but they also tend to take positive action. Most ethical banks in the UK, such as Gatehouse Bank, a Raisin UK partner bank, also promote environmental and social progression.

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Why is ethical banking important?

The importance of ethical banking is that it encourages transparency, helps build strong communities, and establishes a set of principles and ideals governing how money moves around and who it goes to. Although their aim is still to make a profit, just like any other financial institution, ethical banks seek to do so without compromising on principles or causing harm.

The growth of ethical banking

With more social awareness existing around the effects that consumerism can have on issues such as climate change and human and animal rights, more people are making a conscious effort to act more ethically. 

As you can see from the following chart of historic market share, ethical banking and ethical investments have more than tripled since 2000.


Why join an ethical bank?

Many people join ethical banks that uphold the same values they have themselves. It’s a way of keeping both your money and your morals aligned. You might consider opening an ethical banking savings account if you want to be certain that your money won’t be invested in companies you would consider unethical.


Which UK banks are ethical?

Many Sharia banking providers are considered ethical because they follow Islamic laws, meaning they won’t invest in prohibited practices such as alcohol, tobacco or gambling. You can apply for Sharia and other ethical bank accounts from the providers in the table below. 

Some of the most ethical banks in the UK are the following:

Bank Why are they considered an ethical bank?
Gatehouse Bank With a focus on being “socially responsible, ethical, fair and transparent”, Gatehouse has won the moneynet award for being the Best Ethical Savings Provider three years in a row. They offer a ‘Woodland Saver’ account, which plants a tree in a certified UK woodland project for every account opened or renewed. The bank has also confirmed that it’s become operationally carbon neutral.
You can start ethical banking immediately by choosing Gatehouse Bank from the Raisin UK savings account options.
Nationwide Perhaps the largest household name when it comes to ethical banking, Nationwide was founded in 1848 and isn’t listed on the stock market, meaning it is run for the benefit of its members only. Nationwide has a ‘Procurement for mutual good’ programme which actively seeks to combat issues such as climate change and modern slavery.
Tridos Bank Granted a banking license in 2019, Tridos is a relative newcomer and was founded in the Netherlands in 1980, with the aim of reinventing the banking industry. Tridos is on an ethical banking mission to make the world a better place through their Certified B Corporation Status. They only invest in companies with a focusing on people, environment or culture and have so far spent £8.5 billion on projects around the world, publishing details of each one on their website. Their contactless cards are also made from renewable, plant-based materials, and can be fully recycled when they expire.
Starling Bank Running on carbon-neutral AWS servers in Dublin and operating on a branchless basis with a small number of offices, Starling - a Raisin UK partner - is considered an ethical bank. They have also pledged to become a NetZero company, making their new credit and debit cards from 75% PVC recycled plastic.
QIB Winner of the 2019 Banker’s UK country award for best Islamic Bank, QIB UK could be considered an ethical bank because it follows Islamic law. This means it doesn’t invest in businesses prohibited under Sharia principles, such as alcohol, tobacco or gambling.

If you’re looking for more information on individual banks’ ethical performance, the Good Shopping Guide has a handy table that ranks institutions based on a range of ethical criteria.  You can also read more about different ethical banks on the Ethical Consumer website.

Visit the Raisin UK marketplace today to compare a range of savings accounts from ethical banks.

What are partially ethical banks?

To tell a completely ethical bank from its not-so-ethical counterparts, take a look at how transparent they are about their ethics and values. A good example of a partially ethical bank is the disruptive, app-only giant Monzo. 

While Monzo definitely does do some good, including running on carbon-neutral AWS servers and stocking their offices with environmentally-preferred products, exactly what they invest in isn’t completely clear.

What's the difference between a 'traditional' bank and an ethical bank?

When you deposit money in any financial institution, you are trusting that financial institution to decide where your money goes between the time you make a deposit and when your money is returned to you. That’s because the bank will lend money and make investments to make a profit on the capital they hold. 

The main difference between a ‘traditional’ bank and an ethical bank is which companies they consider investing in. Traditional banks will typically deal with any company they think will make a profit. Ethical banks will ensure that your money is lent to companies that do not negatively affect our society or the environment.

Are building societies more ethical than banks?

Banks are run to maximise profits for their shareholders, which is how they make their money. Building societies, on the other hand, are owned and run by their members, which is just another term for customers. Members are also able to vote at annual general meetings (AGMs) and stand for election to the board, which means building societies could be seen as more ethical than banks. 

Another reason building societies may seem more ethical is because under the Building Societies Act 1986, it’s stipulated that at least 75% of business assets must be loans that are fully secured on residential property, as opposed to investing money into companies whose ethics may not be aligned with their customers’ personal beliefs.

What is a sustainable bank?

A sustainable bank is a financial institution that recognises the importance of social and ecological criteria when it comes to the creation and use of financial services. In simpler terms, a sustainable bank invests in activities such as energy efficiency, sustainable agriculture, healthcare or education as opposed to damaging industries such as oil or unsustainable farming.

Will I still get a competitive rate with an ethical bank?

While some ethical banks might not make as much profit as they deal with a fewer number of businesses, this shouldn’t affect the interest you might be able to earn on a savings account.

Is ethical banking the same as Sharia banking?

Sharia banking could be considered a type of ethical banking. Also known as Shariah, Shari’a or Islamic banking, Sharia banking follows Islamic law. That means your money won’t be used to fund businesses prohibited under Sharia principles, such as alcohol, tobacco or gambling. Through a Sharia savings account, you’ll earn profit rather than interest, as earning interest is against Islamic law.

Where can I apply for ethical bank accounts?

Many ethical banks provide online banking services, and you can also apply for savings accounts from a range of ethical banks at Raisin UK. We offer savings accounts from some of the best ethical banks in the UK, and it’s quick, free and easy to open a savings account online.

Simply register for a Raisin UK Account and apply for the ethical savings account that’s right for you.

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