What is Ethical Banking, Anyway?

When you put your money into a current, ISA or savings account, do you know what your bank does with your money? Very few people do.

The money doesn’t just simply sit in your account; it goes into a pool of funds the bank uses to make profitable investments. You don’t choose where this money goes; the bank does.

If you dig a little deeper, you might feel a bit uneasy about what your money is actually being used for.

Virtually all the big banks have extensive investments in fossil fuels, including the most damaging ones like tar sands and ultra-deep sea drilling. Barclays leads Europe in banking fossil fuels ($85bn) and fossil fuel expansion ($24bn) and is the top European banker of fracking and coal power. Most major banks support the arms and tobacco sectors.

Ethical banks, on the other hand, are banks whose business model is designed around making sure they have no negative impact on the environment or on society. Some ethical banks will explicitly state they avoid sectors such as arms, tobacco or fossil fuels, while others will invest in schemes that benefit society such as renewable energy or local housing projects.

This means that ethical banks will have certain rules and policies in place determining where they will invest your money. Banking with an ethical banks is a great way to keep your money and your moral convictions safe and sound.

What Ethical Bank Should You Choose?

According to Ethical Consumer, Triodos Bank is currently the best buy for current accounts because it is “fully transparent about its investments” and “ahead of the field both in terms of its environmental and social commitments”.

The account costs £3 a month and can be managed online or by app. It also comes with a debit card made from 100% renewable resources such as plant leaves and corn.

Ecology Building Society, Charity Bank, Co-op Insurance, Ecclesiastical Insurance, Royal London and Aviva, as well as app-based banks Starling, Monzo and Revolut, also came out on top of rankings by Ethical Consumer. The options are there; it's about finding what works best for you.

So why does any of this matter? Plenty of people make informed decisions based on their ethics; from secondhand clothin to free-range eggs and taking the train rather than flying. Ethical banking is a really clear extension of this: it’s about making sure your money aligns with your values.