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
Ecology Building Society
Green/Ethical Products
- Ecology mortgages.
- Ecological lending.
- Charity deposit account.
- Ecological savings accounts such as: Eco-60, Earthsaver Bond, Foundations Cash ISA, Foundations Deposit.
Ethical Lending or Insurance
The bank won’t lend money to finance projects involved with:
- Holiday homes or second homes
- Agricultural activities that involve intensive farming or riding stables
- Mobile dwellings
- Houseboats - although we do lend for houseboat moorings
- Dwellings with less than 12 month occupational residency rights.
This covers all lending practices across the business.
Lending criteria has a number of categories defined by the board:
- Sustainable housing practises
- Sustainable lifestyles and sustainable economic activity.
- Other ecologically positive projects and ventures.
- Lending to make or secure the market.
The audit of the Ecology Building Society’s Environmental Policy (2011) states that “all applications, irrespective of value, are assessed for both ecological and financial suitability.” There is also a lending committee that becomes involved in ‘commercial’ cases where lending would be in excess of £100,000 and for any project which is not easy to asses against technology/feasibility. It also reviews its lending policy regularly, and has dialogue with experts in the green building field.
Undertakes Quality Assurance on all residential mortgage cases to ensure they comply with their lending criteria (see here). They state that their staff and lending committee are trained in areas of green building and environmental management. Also include environmental specialists on their board.
The company does not lend to finance projects under certain circumstances (see above) which contradict their values and goals.
Human Rights
The company has a commercial lending portfolio, which only lends to:
- Established environmental businesses
- Registered charities and voluntary organisations
- Community owned enterprises
- Fairtrade businesses
- Ecological property developers.
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 governments or other actors through their transactions is remote, given the focus of their operations.
Financial Exclusion
Ecology states that it actively supports sustainable local economies through its lending on shared ownership, housing association and housing co-operative properties, and through its commercial mortgages for ecological and community businesses. Ecology lends to affordable home ownership schemes, including Community Land Trust developments.
No evidence that the company provides direct financial support to or engages in partnerships with Credit Unions and CDFIs (Community Development Finance Institutions).
No evidence found of Ecology Building Society’s involvement in any microfinance (or microinsurance) projects.
The company does lend at lower rates based on the environmental and ecological impact of the project being undertaken (e.g. its C-change mortgage discounts which reward energy-efficient homes and energy saving improvements). This in turn makes the properties more affordable to run, as energy bills are lower.
Environment
Ecology Building Society's environmental policy covers the key areas of climate change, energy efficiency, water use and waste management.
It is committed to continued improvement of its environmental performance.
Carbon Neutral
The Society states: “It endeavours first of all to reduce its carbon emissions. Where this is not possible, the Society seeks to mitigate its impact through carbon offset. The Society has gone further and offset the carbon emissions created by its activity from 1981 (its year of inception) to 2003 through programmes with the Carbon Neutral Company and a local organisation, Treesponsibility. The emissions for recent years have been included in the offset programmes of various organisations”.
Equal Opportunities
They state:
“As an equal opportunities employer, we're committed to ensuring that our workplace and employment practices are free from discrimination, harassment or victimisation on any grounds, and all of our staff are responsible for implementing these policies.
Our recruitment practices and procedures seek to ensure equality of opportunity, and all appointments are made on merit.”
They also state they have an equal opportunities statement available upon request. The policy addresses the key issues of race, gender, disability and sexuality.
Women on the Board
UK Company:
2/6 women hold top level board positions (33%).
Voluntary Standards & Initiatives
Ecology Building Society is a member of or signatory to the following relevant charter or initiatives:
- The International Association of Investors in the Social Economy (a worldwide network of financial institutions active in social and environmental areas).
- UKSIF.
- Member of the Global Alliance for Banking on Values
- Member of Forum for the Future
- Signatory to the Transforming Finance Charter for a New Financial System.
Ecology is also a partner with:
- The Good Banking Forum.
- Institute for Social Banking (training and research).
Charitable Giving
The Ecology Building Society Charitable Foundation aims to support projects that enhance the built environment for community benefit.
Ecology Building Society
- Mortgages
- Savings
Ecology Building Society
Ecology Building Society.
7 Belton Road,
Silsden,
Keighley,
West Yorkshire
BD20 0EE.
