Ethical Banking and Ethical Investing: Food for Thought

19th February 2021

My journey to understanding the intersectionality of my activism was a long one, and questioning the potential negative impact of where I put my money is a relatively recent concern of mine… So what exactly is ethical banking and ethical investing and why is it now more important than ever before?

ethical banking

This article is published in partnership with bunq, the Bank of the Free. Banking is probably one of the last things on your mind when you think of eco-lifestyle, but it shouldn’t be. You can have a huge impact by switching to ethical banking.

Is your bank funding climate change?

The path to sustainable living can take many shapes, from what we put in our mouth to how we dress and travel, but none are more powerful than withdrawing our personal funds (known as divesting) from the corporations that are most to blame for the root causes of many environmental problems.


Ethical Banking and Ethical Investing:
Food for Thought


Have you ever wondered what your bank does with your savings? Today, I urge you to read this and have a good think about it. Maybe you don’t have a lot of money and you never considered yourself an investor. But here’s the news: nobody’s money stays dormant in their account. Whether we like it or not, we are all investors, and, for the most part, non-consensual ones.

Why Consider Ethical Banking?

Do you use your bike to work? Offset most of your flights’ emissions? Buy only local and organic and for the most part vegan? Dress second-hand and fair? Are you doing all of this while paying for all of those eco-commodities with a card from a large conventional bank?

Do you know that choosing ethical banking can be far more powerful than all your other ecological habits? It’s quite possible you didn’t know this — because your bank doesn’t want you to know.

The sobering truth is that most traditional banks, pension funds, and insurance companies are investing in the root causes of climate change; that is to say, oil, coal, and gas. Not only does this have a direct impact on climate, but heavily investing in assets that are bound to one day lose their value as we transition towards a low-carbon economy could be financially suicidal — sooner or later, they’ll come crashing hard, and our money with it. This is known as the carbon bubble and is another story of its own.

As we speak, our money is being reinvested and moved around with little transparency. The total exposures of European financial institutions to firms holding fossil fuel reserves exceed a whopping €1 trillion, and to the arms trade, €24.2 billion. That’s a lot of dirty money.

sustainable banking

Total fossil fuel investing by year (source)

And the majority of us might not even know that our savings are financing controversial projects.

But our inaction is costing the planet.

So why not use our savings for good, starting now by divesting and doing our sustainable banking with one of the many emerging green banks?


What is Ethical Banking?

According to the European Federation of Ethical and Alternative Banks and Financiers, an ethical bank is a bank that ensures its activities support cultural, social and environmental projects. In other words, green banking supports social inclusion, sustainable development, the development of social economy, and social entrepreneurship, while maintaining its core business model (collecting deposits and providing loans).

The actions of sustainable banks come in different shapes too. Most importantly, green banks operate on the ground rule of utmost transparency and make sure their investments are done in an ethical way.

Beware of greenwashing though, as almost all banks have some kind of corporate responsibility and leverage this fact for their PR. Sustainability is a trending topic after all.

Below are some key elements to look out for when considering ethical banking.

Transparency

Some banks are using “financial privacy” as an excuse not to divulge their professional activities. I’ll make some recommendations below, but when shopping around for a new bank, transparency comes as the most effective way to create both individual and collective responsibility and to drive change. Your bank should be transparent on how they invest and if they are paying their fair share of tax.

Climate Engagement

Banks have a critical role in achieving the objectives of the Paris Agreement and for that, they must first and foremost stop investing in fossil fuel. Some ethical banks like bunq have taken it a step further and are planting trees for the money you spend.

Social equality

We often disregard dimensions other than the environment when considering sustainability, but the UN has established a blueprint for health and prosperity consisting of seventeen sustainable development goals and an ethical bank should also be a socially responsible bank.

Many banks are funding the arms trade and arm export to conflict regions and are having a direct and devastating impact on people’s right to life, as well as their economic, social and cultural rights. That is, very basic and often taken-for-granted things such as health, water, education, food, and housing.

A socially responsible bank will also invest in communities of colour and low-income communities.


Green Banking Options

ethical investing with bunq

What are the most ethical banks? I’ll focus on the countries where the largest part of my readership is, but for a comprehensive guide of banks and their impact on sustainable development, always checkout unbiased associations like the Green Bank Network, B Corp, the Green European Foundation, or Fair Finance. If all else fails and you can’t find a sustainable bank in your country, you can join a credit union.

In Germany where I live, being an expat and finding an ethical bank can be tricky, especially right now with COVID-induced bureaucracy delays at immigration level. In every aspect, one of the best banks in Germany for expats is bunq. Not only do they let you open an account in two minutes without a social security number from home and go above and beyond with their transparency, but they also let people plant a tree for each 100 EUR they spend so they can become CO2 free in less than 2 years. They also have a wellness program for their members called funq @ bunq with daily yoga, meditation or workouts sessions offered online.

Germany: bunq | GLS | Tridos | Tomorrow | EthikBank | Umweltbank

United States: Aspiration | City First Bank | Amalgamated Bank | National Cooperative Bank | Southern Bancorp | Alamerica

Canada: Citizen Bank | Desjardins

UK: Triodos | Starling Bank | Charity Bank | Engage

Australia: Commonwealth Bank | Teachers Mutual Bank | Bank Australia

Denmark: bunq | Oikos | Folkesparekassen | Dragsholm Sparekasse | Merkur Cooperative Bank

Netherlands: bunq | Triodos | ASN Bank

Italy: bunq | Banca Etica

Spain: bunq | Triodos | Fiare Banca Etica | Coop57

France: bunq | Triodos | NEF | Crédit Coopératif

Sweden: bunq | Ekobanken | JAK Medlemsbank

Switzerland: Alternative Bank Switzerland


More Ways of Finding Ethical Banks

B Corp

B Corp certified companies meet the highest standards for social and environmental performance, transparency and legal accountability. The B Corp certification goes beyond a product or service and measures the entire social and environmental performance of a company. The impact of the company’s operations and business model on employees, the community, the environment and customers are all measured and continually improved.

Many social banks are listed here. Use their directory to find an ethical finance solution in your country.

GABV (The Global Alliance for Banking on Values)

The GABV is a network of independent sustainable banks that use finance to ensure sustainable development for people and communities without access to the banking system, as well as the environment. Find out if your bank is a part of the Global Alliance for Banking on Values here.


How to Break up With Your Old Bank

Did you find out your bank is guilty of greenwashing, for example by saying it is committed to the fight against climate change but meanwhile supporting controversial climate control projects around the world?

It’s completely free to close a current account and it’s totally fine to do this progressively over the course of a month or two. Here are a few steps to keep in mind when closing an account and open another one elsewhere:

  • Start by opening an account in the bank you have chosen. 
  • Transfer all automatic payments to your new account, such as direct debits and transfer orders
  • Make sure you keep money in both accounts for a while and keep monitoring the account you want to close for any leftover automatic payments (think: rent, electricity, Paypal, Netflix, Spotify, Apple, etc)
  • When you are 100% sure all automatic payments have been transferred to the new account, request the closure of the old account, indicating the reasons for your decision (that’s important if we want to be the  change we want to see in the world, banks need to know why we’re divesting away from them)

Who to Avoid

In their sobering report “Banking on Climate Change”, the Rainforest Action Network is listing the major culprits in funding the fossil fuel industry. Those should be avoided at all cost.

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