Banking Overview
How much do you know about your bank? Do you know what type of businesses it lends to?
Does it refuse to lend to companies with poor human rights records, that sell arms or pollute the environment, for example? Does your bank offer services to those on low incomes or the unemployed? And how many women sit on its board?
Such questions often go unasked of the banking sector. But the same caring principles that make you buy Fairtrade goods and recycle household waste can be applied to how you bank too.
Key green and ethical issues to consider
Finding a green or ethical banking option
How banks use your money
The money that you deposit in your current or savings account doesn't just sit there untouched until you require it again - your bank lends it on to others at interest.
Banks don't just lend money to current account-holding customers either, they lend to large corporations, public institutions and even governments.
As many banks are listed on the stock exchange, they are answerable to external shareholders who expect healthy returns on their investments.
While the Treasury hands down some prohibitions as to who banks can and can't do business with, it still leaves them relatively free to engage with companies that you might not approve of and they use your money to do it.
Would you approve if your bank was lending money to heavy polluting industries or even to an oppressive regime?
Key green and ethical issues to consider
Responsible Lending
The recent global economic downturn is often attributed to the 'sub prime crisis'.
Sub prime lending means giving loans to people who are considered to be in higher risk categories - those more likely to default or who have a poor credit history, for example.
This type of lending is not problematic in itself - credit unions and community development finance institutions regularly lend to sub prime candidates. Instead, irresponsible lending to customers in the sub prime category is the problem.
In the build up to the 'crunch' some financial institutions were lending 100% mortgages (and in some cases more) to people who would not be able to make their repayments in the long term.
Lending responsibly shouldn't be limited to just mortgages - it applies to all loans, big and small, and to the provision of credit cards too. Figures from the Bank of England show that UK residents owe £233bn on credit cards, overdrafts and other loans.
Key questions to ask: Does your bank have responsible lending policies that ensure that its products are targeted in an appropriate manner? And does it provide advice or debt management services to customers who fall into financial difficulty?
Climate Change and the Environment
Banks have an impact in these areas, not just in terms of who they lend to or invest in, but how they run their own operations. It is important to find out what your bank is doing to improve its environmental performance as a business: have they pledged to go carbon neutral for example? Or do they offer any green products to their customers?
Financial Exclusion
There are an estimated two million people in the UK without even the most basic bank account. Is your bank doing anything to address this situation?
For more details see our Financial Exclusion section.
Project Finance
In its most basic form, this type of financing is for companies and governments where lenders are repaid through the revenues generated, i.e. the lender has a vested interest in the success of a project.
Common projects receiving finance are petrochemical and chemical plants, power plants, telecommunications and infrastructure. But do lenders ensure that these projects are conducted in a green or ethical way?
Use our search facility to find out about your bank's policy on the environment, ethical lending, responsibility towards its customers, equal opportunities and other issues.
Finding a green or ethical banking option
Building Societies and Credit Unions
Mutual building societies and credit unions are generally smaller, customer-owned operations that primarily lend to individuals and so are less likely to have the same exposure to issues like the arms trade, for example.
Green and Ethical Alternatives
There are a number of banks and building societies with prominent green and ethical credentials.
- Co-operative Bank: this bank's robust green and ethical policies govern its current accounts, savings and investment products.
- Smile: this internet arm of the Co-operative Bank shares the parent company's ethical policy.
- Triodos Bank: this bank offers green and ethical savings accounts and investments. The bank was established in 1980 in the Netherlands and now has significant operations in the UK.
- Ecology Building Society: this mutual building society offers a range of green savings accounts and mortgage options.
- Charity Bank: this bank invests through loans to benefit charities and communities. It offers saving accounts and cash ISAs to consumers.
You can use the banking section search to find the banks that perform best against our green and ethical criteria.
Your next steps
What do you do now? Check out our guide Next Steps - Banking for information on how to give your bank account a green and ethical makeover.
Useful links to know
The Financial Conduct Authority (FCA) regulates the financial services industry in the UK. The FCA aims to protect consumers, ensure the industry remains stable and promote healthy competition between financial services providers. The FCA has a useful guide to your banking rights. Visit www.fca.org.uk or call the FCA consumer hotline 0800 111 6768 for more information on your rights and the FCA's work.
The Prudential Regulation Authority (PRA) www.bankofengland.co.uk is part of the Bank of England and is responsible for the prudential regulation and supervision of banks, building societies, credit unions, insurers and investment firms. It supervises financial institutions at the level of the individual firm.
The Financial Ombudsman Service www.financial-ombudsman.org.uk is a service set up by the UK Parliament to sort out individual complaints that consumers and financial businesses are not able to sort out themselves.
Banking Search
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Bank / Building Society Profile
Charity Bank
Green/Ethical Products
- Ethical savings account.
- Affordable charity loans and loans to social enterprises and other community organisations.
- Ethical Cash ISA.
- Community Account for charities.
Ethical Lending or Insurance
Charity Bank has an ethical lending policy stemming from its mission statement which states that it sets out to “lend to charities, community organisations and social enterprises that are under-served by other lenders in order that these organisations can address the social needs within communities across the UK or provide other public benefits”. Charity Bank therefore does not look to exclude organisations that operate in areas deemed as unethical, but seeks to actively invest in organisations that are having a positive impact on their local community.
Charity Bank provides loan funding to organisations that demonstrate that they are “constituted with social objectives and are non-profit distributing to private individuals”. It states that it also lends to “for profit” companies if the loan is “for exclusively charitable purposes”.
Due to the nature of the organisations to which Charity Bank lends, Charity Bank’s whole lending team is driven by its lending policy as set out in its mission statement. In addition, the Bank employs an Impact Assessor to review the social and environmental impact of each loan and to evaluate the performance of the Bank as a whole.
Charity Bank can demonstrate examples of the company’s ethical lending policy in action. The loan application form outlines the information sought at the first step in the Bank’s due diligence process. The charitable purposes of the borrower and the potential social and environmental benefits the loan would bring are scrutinised as part of this. Charity Bank publishes details of loans on its website, making it possible for investors to verify how the Bank’s lending policy is put into practice.
Human Rights
Charity Bank only lends to charities and social enterprises.
Whilst there is no specific human rights policy in relation to their commercial lending, every loan application is assessed in terms of the positive benefits it would bring to the beneficiaries and local communities. The likelihood of the bank contributing to human rights violations by a government or other actors through their transactions is remote, given the focus of their operations.
Financial Exclusion
Charity bank offers affordable charity loans and loans to social enterprises and other community organisations.
Charity Bank is itself a CDFI and was one of the founding members of the CDFA. Charity Bank has worked in partnership with Key Fund, a CDFI based in Yorkshire as part of the Yorkshire Forward programme.
Manage savings accounts via telephone.
Charity Bank will work alongside the CAF Bank and social investors to provide a joint loan facility for a new flagship venture, the Social Justice and Human Rights Centre which will be a hub, based in London, for a number of human rights organisations.
Lends to Microfinance funds.
Environment
No evidence of an environmental policy was found.
However, it does lend to the environmental sector, amongst other areas. Charity Bank’s lending to environmental organisations covers energy, recycling of goods, and biodiversity.
Carbon Neutral
No commitment to become fully carbon neutral was found.
Equal Opportunities
No information found on the company’s diversity policy.
Women on the Board
UK Company:
2/9 women hold top level board positions (22%).
Voluntary Standards & Initiatives
Charity Bank is a member of or signatory to the following relevant charter or initiatives:
- International Association of Investors in the Social Economy (a worldwide network of financial institutions active in social and environmental areas)
- the Institute for Social Banking
- UKSIF.
Charitable Giving
It provides hands-on support to the businesses and charities it lends to, as well as encouraging its own staff to volunteer within the community. Charity Bank has lent £180m to charities and social enterprises.
Charity Bank
- Savings
- Loans
Charity Bank
The Charity Bank Ltd.
Head Office:
194 High Street,
Tonbridge,
Kent.
TN9 1BE.
