| |
Green Banking
|
Green and ethical banking: How eco-friendly are your finances?
Compare Current Accounts
By Becca Talbot
becca.talbot@consumerchoices.co.uk
In the UK, there is currently around £4billion invested in the ethical market. Being environmentally friendly isn't just a fashionable trend anymore, for many its a way of life, and has become second nature.
As the demand for green and ethical products grows, more and more are becoming available. Our guide looks at one of the newer options to hit the environmentally friendly shelves.
"Green Banking or Ethical Banking, what's the difference?"
There are two types of eco-friendly banking, Green Banking and Ethical Banking. The difference between the two is simple - while green banking deals essentially with the day to day management of your finances, in terms of statements, branch energy costs and "green" initiatives, ethical banking looks at the wider picture, investing your money in companies that will serve to environmentally benefit everyone.
Green Banking
If a building society or bank deem themselves to be "green" this generally means that they operate a day-to-day business that is environmentally friendly. This can range from things such as using recycled paper for all their postal correspondence, powering their branches with renewable energy sources, or planting trees to help reduce the company's own carbon footprint.
Initiatives such as Natwest's Carbon Offsetting offer you the possibility of compensating for the damage your carbon dioxide emissions cause to the environment by calculating your carbon footprint and then investing your money accordingly.
HSBC, branded the first carbon neutral bank because of their tree planting, energy reducing and “green power” initiatives, is involved in a number of global projects to offset its carbon footprint, at a cost of £3.4million a year to the bank.
However, when you compare this to their gross profit in 2007, which amounted to a whooping $12 billion, their green policy represents less than 0.5 per cent of their profit, and doesn’t really seem that impressive.
Ethical Banking
Banks and building societies make profit by lending the money you invest to third parties at a higher rate of interest. This is common knowledge. What often isn’t known is which companies the banks are lending your money to.
For example, your money could be loaned to companies involved in the fur trade, arms dealers, or multi-national companies with poor environmental records.
Functioning on the principle that funds are only invested into businesses that can prove that they won’t harm the environment, people around the world, or animals and wildlife, the idea behind Ethical Banking is that the money you deposit with your institution is only invested in pro-eco firms.
The first of its kind, in 1992, The Co-Operative Bank launched its ethical policy, available on their website, that provides transparency on who they will and won’t lend to.
Learn more about The Co-Operative’s ethical policy
|
"...your money could be loaned to companies involved in the fur trade or arms dealers..."
|
The Triodos Bank is one of Europe’s leading ethical banks. Established in the Netherlands in 1980, with a UK office following in 1995, Triodos offers an ethical banking service. Their mission statement states their aim is “To help create a society that promotes people’s quality of life and that has human dignity at its core. To enable individuals, institutions and businesses to use money more consciously in ways which benefit people and the environment, and promote sustainable development.”
Learn more about ethical banking with Triodos
Which is better?
When it comes to choosing an eco-friendly option for your savings, it really is a matter of personal taste. While green banking will show that you are conscientious about "doing your bit" today, ethical banking will show that you are more concerned about the long term affect of what your finances are used for by your bank. If you want to be really eco-friendly, there's nothing to stop you from saving your money with both.
Back to the top
How to be environmentally friendly with your finances
Below we’ve listed just some of the ways in which you can “clean-up” your finances:
Current Accounts
At the moment, the choice of banks offering eco-friendly current accounts is pretty limited. The main providers are The Co-Operative Bank, HSBC and online bank Smile.
| The Co-Operative Bank |
The Co-operative Bank offers a Current Account with 1.24% AER, and a £200 fee-free overdraft. Banking with the Co-op guarantees that your money will be invested with companies that are environmentally friendly. |
| HSBC |
In their bid to cut down their use of paper, when you choose HSBC’s Go Green Current Account, you’ll receive no paper statements, fewer letters to open, no cheque book or paying-in book and no paper-based marketing. |
| Smile |
The Co-Operative Bank’s online offshoot, Smile, ensures that money invested will never reach companies that pursue profits at the expense of their social and environmental responsibilities. They have won the ‘Your Money’ award for the best internet banking provider six years on the trot (2002 - 2007), offer a Current Account with 2.27% AER and a 12 month £500 fee-free overdraft. |
If you’d prefer a building society, Nationwide’s Current Account option offers 3.50% AER and free card use abroad. And as a building society, they only lend to people buying houses, and so avoid investments in unethical companies.
Savings
With normal savings accounts it is possible that your savings will be invested in anything from weapons manufacturing to oil companies. Luckily there are alternatives.
Triodos only invest in companies or projects that are proven to have a positive effect on the environment or our society. A Co-op Savings Account is also worth considering, although they’re not as ethically strict as Triodos.
Mortgages
“Green mortgages” are still very new, with only a few providers, such as the Ecology Building Society, offering them. However, many larger lenders are currently considering a green mortgage option. These can work in various ways, such as donations to charity, or by incentives to improve a home’s energy efficiency.
The Co-Operative Bank funds several Climate Care projects around the world on behalf of its mortgagers. Money from these mortgages is being spent on planting trees in Kibale National Park, Uganda, helping to offset CO² emissions.
Back to the top
Does it pay to "go green"?
Aside from the fact that you’ll feel better knowing you’re supporting an eco-friendly project, sometimes environmentally-friendly banking can be wallet-friendly as well, although none of the providers offer any real financial incentives to join them.
When it comes to investing your money, you have to decide which financial institutions and products best match your own feelings on what’s green or ethical. Choosing an account is a question of personal taste, depending on whether you’re more concerned about your own financial well-being, or the well-being of the environment.
If all the choices seem a bit overwhelming, there are plenty of ethical Independent Financial Advisors that specialise in guiding you through the world of green banking. Ethical Futures are an Edinburgh based firm that can provide extensive advice about green investments, and The Ethical Investment Co-Operative which operates a network of offices around the UK, can also offer advice. Back to the top
Our Recommendations
Chris Eagle, from ConsumerChoices.co.uk says: “It is worth looking at all aspects of an account and provider before deciding which route to go down. As well as being eco-friendly, you’ll want your money to do well. Many of the banks mentioned have reasonable rates of interest, so shop around for the deal that suits you best, in both a financial and ethical sense.
"If you're adamant you want your finances to be invested in pro-eco firms, then ethical banking is the best option for you. Check out The Co-Operative Bank's range of savings accounts, current accounts and mortgages and decide on one that suits your needs.
"Alternatively, you could put your finances into an account offering the highest interest rate, and then use the additional money you earn to fund your own "green" initiatives, such as a recycling scheme or changing your energy provider to one that offers an environmentally-friendly option."
|
| 
