While changing my lifestyle to be kinder to the environment, banking never crossed my mind. I've seen enough films with greedy, unethical banker characters in them, but didn't connect the dots that my money may be being lent to dirty companies and projects. That is until last year, when I read The Joyful Environmentalist by Isabel Losada, and the Bankrolling Extinction report, which made me uncomfortable with what my money may be financing and encouraged me to find out more. What I found was shocking, and encouraged me to make the switch to an ethical bank. Here, I share some research on what banks are using our money for, and what an ethical bank is.
What could banks be using our money for?
I very naively used to assume any money I had in the bank just sat in my account until I made a purchase or withdrew it. This is obviously not the case, and the reality is much more complex. Banks use our money to lend and invest. We don't have control over this, and it can include funding companies and projects that harm people and the planet.
Funding the climate and biodiversity crises:
Bankrolling Extinction revealed that in 2019, the top banks invested over $2.6 trillion into sectors that are driving the destruction of nature through mining, fossil fuels, deforestation, dirty transport, and pollution. Banking on Climate Change found that the 60 largest commercial and investment banks invested a total of $3.8 trillion into fossil fuels from 2016–2020.
Dirty Profits 6 investigated banks that fund mining and extractive companies. These industries are complicit in horrific environmental and human rights violations, and despite being aware of this, banks continue to invest. The 10 banks investigated, including UK banks HSBC and Barclays, were found to have provided over €100 billion to 10 mining and extractive companies.
Investing in nuclear weapons and the arms trade:
The 2019 report 'Shorting our security - Financing the companies that make nuclear weapons' by the International Campaign to Abolish Nuclear Weapons (ICAN) revealed that between 2017 and 2019, financial institutions invested $748 billion in top nuclear weapon producers.
Banks also contribute to funding the arms trade to the Middle East and North Africa, and are therefore linked to the human rights abuses that occur in countries within these regions. Ten banks known to invest in global arms companies were investigated in the 'Dirty Profits 7' report, which found that the total finance provided amounted to roughly €24.2 billion between 2015 and 2018. Of banks in the UK, Lloyds Bank was the largest provider, loaning €4.1 billion to arms companies.
How do I know if a bank is ethical?
While we can't choose what our bank does with our money once it is in our account, we can choose a bank that commits to using it to drive positive change. In order to choose an ethical bank, Ethical Consumer advise you to ensure they:
- are clear about how they will invest your money.
- pay their fair share of tax. This is important as many banks operate subsidiaries out of known tax havens.
Ethical Consumer and BankTrack both have extensive information on individual banks, including what they invest in and whether they pay tax. Triodos Bank, which I chose to switch to, are Ethical Consumer's 'Best Buy' for Current Accounts. There are alternative ethical banks listed in their guides, so it is worth considering more than one to find the best fit for you.
Bank of Scotland, Barclays, First Direct, Halifax, HSBC, Lloyds, M&S, Natwest, Royal Bank of Scotland, and Santander all rate poorly for their environmental and social ethics.
I don't have much money - is it still worth switching?
Yes! I don't have much in the bank either, but I see it that I wouldn't even spend £10 at a company that I knew to be harming people or the environment, so banking isn't much different. If many individuals put a small amount of money into an ethical bank, collectively all of our money adds up and makes a difference. Ethical banks will choose to support positive projects, one example is Triodos Bank have invested £8.2 billion into projects across Europe benefitting people and the planet - wouldn't you rather support that than fossil fuel companies?
How do I switch banks?
Government regulation in the UK has forced banks to make it easy for customers to switch, and it takes as little as 7 days. Info on how to switch here.
Helpful resources:
BankTrack
Bankrolling Extinction
Ethical Consumer
Facing Finance - Dirty Profits
Rainforest Action Network - Defund Climate Change
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