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
Smile
Green/Ethical Products
Smile is part of the Co-operative Bank. All Co-operative Bank products are covered by its customer-led Ethical Policy.
Products with a specific ethical or green element include:
- Smile sustainable funds.
Ethical Lending or Insurance
The Co-operative Bank has an ethical lending policy which applies across all its transactions with businesses seeking finance.
On applying for banking services with The Co-operative Bank, all business customers are required to complete an Ethical Policy questionnaire. The Co-operative Bank states that it will only offer a business banking facilities when it is confident that there are no conflicts with its Ethical Policy.
The ethical lending policy includes exclusion criteria in human rights; the arms trade; corporate responsibility and global trade; genetic modification; social enterprise; ecological impact, and animal welfare areas.
Since 2011 The Co-operative Bank's Ethical policy has been extended to cover the investments underpinning its home and motor insurance products. As a result it does not purchase bonds issued by organisations that do not meet the criteria of the policy.
The Co-operative bank has internal controls to monitor its lending policy as well as inviting an independent auditor to comment on the implementation of their policies and publish the findings.
The Bank states that since its launch in 1992, The Co-operative Bank has withheld over £1.2 billion of funding from business activities that its customers have said are unethical.
During 2012, 110 finance opportunities were referred to the Ethical Policy Unit in connection with international development and human rights, of which 17 were declined with an estimated cost of £2,659,000 gross income foregone.
Human Rights
The Co-operative Bank's ethical policy includes human rights criteria. It will not finance any organisation that advocates discrimination and incitement to hatred, or the manufacture or transfer of indiscriminate weapons, e.g. cluster bombs and depleted uranium munitions".
They will not finance any of the following:
- any government or business which fails to uphold basic human rights within its sphere of influence;
- any business whose links to an oppressive regime are a continuing cause for concern;
- any organisation that advocates discrimination and incitement to hatred;
- the manufacture or transfer of armaments to oppressive regimes;
- the manufacture or transfer of indiscriminate weapons, eg cluster bombs and depleted uranium munitions;
- the manufacture or transfer of torture equipment or other equipment that is used in the violation of human rights.
Since 1992, they have declined £385m finance to businesses in line with their Ethical Policy statements on international development and human rights. During 2012, 110 finance opportunities (2011:159) were referred to the Ethical Policy Unit in connection with international development and human rights, of which 17 were declined (2011: 13), with an estimated cost of £2,659,000 in terms of gross income foregone.
Financial Exclusion
No evidence of any accounts, products, or services aimed specifically at the financially excluded.
Although The Co-operative Bank, of which smile is a division, offers a range of products and services for the financially excluded.
- In 2012, 38% of the bank's branches were located in deprived areas.
- The bank also reports that finance to small businesses in deprived areas as a proportion of equivalent bank activity remains significantly above the industry average in 2012.
- The bank provides basic bank accounts to prisoners ready for use on release. 13,380 bank accounts for prisoners opened since 2009.
- The Co-operative Bank offers a basic bank account, Cashminder, aimed at those who may not be eligible for a standard current account.
No evidence for Smile however The Co-operative Bank, of which smile is a division, has the following:
Credit Union Current Account launched in 2006 in partnership with the Association of British Credit Unions Ltd (ABCUL). In 2012, 25 credit unions were offered the account and over 36,500 (2011: 33,281) customers benefited.
In line with the Bank’s Ethical Policy commitment to support credit unions, a three-year strategy was developed and agreed in 2012. Principles are to provide credit unions and their members with: an accessible, Co-operative banking package; access to a range of Group products and services; and assistance and advice.
Smile's website is ranked as meeting A-level in relation to their level of accessibility according to the Web Accessibility Initiative’s (WAI) Web Content Accessibility guidelines (where AAA is the most accessible).
No other evidence for Smile however The Co-operative Bank has the following:
The company provides the following:
- Mobile and Internet Banking.
- Templates to help customers complete cheques and paying in slips.
- Hearing induction loops in our branches to assist the hearing impaired.
- A textphone, which can be accessed by making a call through TextDirect, dialling prefix 18001 before the telephone number you want.
- Correspondence, statements, PIN advice and brochures available in large print, braille and audio formats.
- Chip and signature cards for customers who are unable to use a keypad or have difficulty remembering numbers.
- Card readers with a larger keypad and audio format for use with internet banking.
- Facsimile signature stamps for customers who have difficultly reproducing a consistent signature.
In 2007, The Co-operative Bank introduced a £25m microfinance fund to support the development of small businesses in some of the world’s poorest countries. To date, they have lent to four microfinance schemes and supported microfinance institutions in 28 countries. In 2012, they agreed a new investment of $5m in a fund supporting microfinance institutions and social enterprises in Latin America, Eastern Europe and Asia.
No evidence found that the company invests in or lends at lower rates to financially excluded communities.
Environment
Co-operative banking Group’s environmental policy covers the key areas of climate change/energy efficiency, water use and waste management.
The environmental policy also contains a commitment to continued improvement in environmental performance.
Carbon Neutral
In 2012 The Co-operative Banking Group, of which smile is a division, maintained its policy of going ‘beyond carbon neutral’ for the sixth consecutive year by offsetting its emissions plus an extra 10% of emissions to cover legacy issues (8% of total carbon offset).
Equal Opportunities
The bank’s diversity policy takes into consideration the key equality issues of race, gender, sexuality, and disability.
Women on the Board
The Co-operative Banking Group:
2/12 women hold top level board positions (17%).
Voluntary Standards & Initiatives
Smile is not a member / signatory by itself of any relevant initiatives, but its parent company the Co-operative Banking Group is a member of or signatory to the following relevant charter or initiatives:
- Opportunity Now and Race for Opportunity (The Co-operative Group)
- UKSIF (Co-operative Banking Group)
- The London Benchmarking Group (Co-operative Banking Group)
- Employer's Forum on Equality and Inclusion (Co-operative Group)
- Employers' Forum on Disability (Co-operative Group)
- Extractive Industries Transparency Initiative (Co-operative Insurance UK)
- ClimateWise (Co-operative Insurance)
- Carbon Disclosure Project Water Disclosure (Co-operative Financial Services)
Charitable Giving
The Co-operative Foundation is an independent charitable trust set up in 2000. The Foundation's current grant-making programme, Truth about Youth, aims to challenge and change negative perceptions about young people, by working with seven charities in cities around the UK. Has committed a total of £5 million since 2009.
Community Initiatives including Skills4Schools, Reading partners, StreetGames Young Volunteers, Offenders’ art exhibitions (invested £82,000), Supporting the homeless (donated £89,000).
Smile
- Current Accounts
- Savings
- Credit Cards
- Loans
- Mortgages
- Investments (through Co-operative Investments)
- Insurance (Car, Home, Pet, Life, Health, Business – through The Co-operative insurance).
- Student Current Account
Smile
smile (smile is a trading name of The Co-operative Bank and part of The Co-operative Group)
The Co-operative Bank plc.
P.O. Box 101,
1 Balloon Street,
Manchester
M60 4EP.
