Ethical banking
From ethical savings and current accounts to socially responsible investments – find out what products are available and how your banking choices can make a difference.
From ethical savings and current accounts to socially responsible investments – find out what products are available and how your banking choices can make a difference.
What is ethical banking?
Ethical banks aim to have no negative impact on the environment and society. Some go further – investing in companies and charities that make a positive contribution to the world.
They’re popular with consumers who are concerned about how their money is used by banks and other banking services. High street banks and financial service providers are also increasingly aware of the importance of reputation, and many want to distance themselves from what they see as questionable investments.
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What makes a bank ethical?
There are many steps a bank could take to be considered sustainable or ethical, but it mainly consists of using customers’ money to invest in worthwhile causes. This could include charities, but also actions like:
- Helping to tackle climate change with renewable energy
- Reducing fossil fuel emissions
- Supporting human rights activism.
Some banks were founded on their ethics, while others introduced ethical and sustainable practices later on. Some publish details of businesses they lend to, others have promised to cut ties with organisations that make money from harmful industries.
In a nutshell, if a bank makes strong efforts to have an overall positive impact on the environment or society as a whole, it can be considered ethical.
Are ethical and sustainable banking the same?
Generally speaking, ethical refers to human rights causes, whereas sustainable refers to environmental ones.
However, an ethical bank is typically concerned with both social and environmental impacts, with a focus on making the world a better place. You might also see an ethical bank referred to as a green bank, an eco-bank or a sustainable bank.
So, for example, a green or sustainable bank may invest in environmental causes and practices such as:
- Offering credit for businesses to make energy-efficient upgrades
- Offering online paperless statements and electronic banking options.
But it will also place equal importance on social improvements such as:
- Lending to charities, volunteer groups and Fairtrade businesses
- Investing in social justice and global equality organisations.
Which banks are ethical in the UK?
It’s a matter of opinion, but there are some banks out there that make a notable effort to make sure their investments have a positive impact. So, how do you know whether a bank is ethical? There are a number of organisations that champion fairness, and it’s useful to look at their approval ratings when searching for an ethical bank.
The Good Egg mark is dedicated to financial services providers that offer a good deal for people and the planet. Banks, insurance providers and mortgage lenders are assessed based on their environmental, social and customer impact. Examples of banks and building societies awarded the Good Egg mark include Triodos Bank and the Ecology Building Society.
Ethical Consumer and B Corporation also recognise and award financial institutions that make a positive social and environmental contribution.
Here are some examples of ethical UK banks:
Triodos Bank
Triodos aims to invest only in opportunities that can drive positive change. These could be environmental causes, or those that deliver a cultural or social impact. It refuses to invest in industries that could be perceived as unethical, such as weapons manufacturing or unsustainable energy – for example, fossil fuels. It also offers complete transparency about all of its investments, so you can see the projects your money supports.
The Charity Bank
Entirely owned by charitable foundations, trusts and social purpose organisations, the Charity Bank supports charities by offering loans they couldn’t find anywhere else.
Charity Bank understands the specific needs and challenges of charities and works with them to build for the future.
It also offers savings accounts for people and businesses who want to invest ethically.
Ecology Building Society
Ecology was the UK’s first dedicated green mortgage provider and is a well-established eco bank. It’s all about the environment and works towards building a more sustainable future. That’s why it only lends money to people who want to make greener choices in their homes and lives.
Which banks are partially ethical?
Again, it’s a matter of opinion. Some banks may not be fully ethical yet, but they might be taking steps to move in the right direction.
For example, a bank may be becoming more environmentally sustainable but might still have investments not considered ethical.
Here are some examples of banks generally regarded as partially ethical:
The Co-operative Bank
The Co-operative Bank was considered an ethical bank, as it offered one of the first ethical bank accounts available in the UK. However, it was later bought out by a group of US hedge funds, which don’t operate in the same way. This makes it a slightly greyer area.
Monzo and Revolut
Some of the more modern, app-based banks are considered partially ethical, because they’re highly accessible, convenient, and also offer better currency conversion and international usage charges. So, while they’re not investing heavily in charitable or green causes, they’re looking after their customers well.
Ethical banks comparison tables for the UK
For those looking to break down ethical banks by the numbers, the Good Shopping Guide provides a very handy table to highlight which banks and building societies are (and are not) doing their bit. The guide assesses banks on a number of factors, including:
- Environmental impact
- Animal welfare practices
- How they treat their customers and the world around them
- Any ethical accreditations they might have
- Criticisms of the bank.
Banks are categorised into three colour-coded bands, giving them an Ethical Company Index Score. Those who perform well by the guide’s standards are in the green category. Mid-tier banks are amber, lower-tier banks are red.
Here are some of the names that feature in each of the three brackets.
Green tier banks
|
Bank |
Ethical Company Index Score |
|
The Charity Bank |
100 |
|
Triodos Bank |
90 |
|
Ecology Building Society |
90 |
|
Monzo |
85 |
|
The Co-operative Bank |
85 |
Amber tier banks
|
Bank |
Ethical Company Index Score |
|
AIB |
70 |
|
Atom Bank |
70 |
|
Newcastle Building Society |
75 |
|
TSB Bank |
70 |
|
Starlink Bank |
65 |
Red tier banks
|
Bank |
Ethical Company Index Score |
|
Cater Allen |
45 |
|
Santander |
45 |
|
Bank of Scotland |
40 |
|
Halifax |
40 |
|
Lloyds Bank |
40 |
Make sure to check out the full table to find out where your bank sits on the overall list.
Ethical current accounts in the UK
Most of the banks considered ethical offer the standard products like current accounts, but some may charge fees to maintain the account. However, the recent growth in mobile and app-based bank accounts has changed the way people save and spend. These app-based banks have a number of ethical features, such as lower currency conversion and international spending fees.
Another option is an Islamic current account. While the name might suggest you need to be Muslim to apply for one, that’s not true. Islamic bank accounts tend to be more ethical than others because they avoid investing in things that violate Sharia law, including gambling and alcohol.
Ethical savings accounts and ISAs
If you have money to save and are considering a savings account or ISA, an ethical bank is a great way to support a better future. Not only will your money be working for you, but it’ll also be working to support others, as ethical banks will use the money to invest in good causes.
While it’s important to pick a bank that aligns with your own ethics, you’ll also want to consider interest rates and access.
For example, instant access accounts might not offer the best interest rates, while those with a higher interest rate may have restrictions on how you can access your money.
Islamic accounts with ethical banking
Islamic banking is the name given to any form of banking that adheres to Shariah law. The key differences to regular banking come in the form of Islamic banking’s relationship with commercial transactions and the charging of interest.
The differences to regular banking include:
- Profit and loss are shared publicly, to avoid any speculation or gambling
- Lenders and investors can neither pay nor collect any form of interest
- Money is made through a share of the investor’s profits
Most banks will offer this form of banking, but always be sure to check ahead of time if this is an option you’d like to pursue. Some banks will even have windows in their branches to deal specifically with these types of accounts.
Credit unions
If you’d rather avoid the current accounts, savings accounts and ISAs on offer by the high street banks, credit unions offer a potential alternative to the traditional options. Credit unions are set up to connect people who are similar. This could include the business interests they want to pursue, which could include ethical investments. They offer most of the same money products as the big banks, but you can find one that supports the causes you’re passionate about.
Are ethical loans and mortgages available?
If you’re looking to borrow money in a socially responsible way, check the products on offer from ethical banks. A growing number of positive-impact loans are available in the UK.
There are also building societies in the UK that specialise in mortgages for environmentally friendly properties. Their savings accounts also help to support sustainable building projects.
The most ethical banks of 2023
Ethical, sustainable or eco banking might not be something you’ve come across before. Or, if you have, you may have dismissed it. But managing your finances in this way has a variety of benefits.
Here’s our top pick of ethical banks in 2023:
- Ecology Building Society. Winner of the Best Ethical Financial Provider award at the 2021 British Bank Awards, Ecology was the UK’s first dedicated green mortgage provider. That means it will only offer loan payments to people looking to make green improvements to their house, or who want to build an environmentally friendly home from the ground up.
- Triodos. Winner of Best Ethical Financial Provider and Best Investment Provider at the 2022 British Bank Awards, Triodos has built on its previous successes as Customer Service Champion in 2020 and Best Savings Provider in 2021. Alerts are set up on the Triodos app to tell you when you’re down to your last £100, or when you won’t be able to make a standing order payment. From a sustainable point of view, its cards are completely biodegradable.
- Starling Bank. Four-time consecutive winners of Best British Bank at the British Bank Awards and Best Current Account Provider in 2022, this app-based bank is a great option for people who are conscious of their carbon footprint. Starling makes a point of avoiding the use of and investment in fossil fuels, mining operations and military funding.
- Nationwide. As a building society, Nationwide isn’t owned by shareholders like the other big names in high-street banking. It’s owned by its members, which means they shape where it focuses its attention, including on ethical projects and programmes to support others. In response to the war in Ukraine, Nationwide pledged to match donations by its members and colleagues, up to £250,000.
- Engage. These accounts are run by credit unions, who in turn support those in the local community who would otherwise be unable to open a bank account.
Ethical bank accounts for charities and community organisations
More banks are making it possible for charities, clubs and other community-focused operations to manage their finances safely and efficiently. Here’s a breakdown of some of the most ethical charity bank accounts and schemes designed to help these organisations:
- Co-Operative Bank – free banking for any charities with less than £1m turnover.
- Charity Bank – fixed rates for charities, with savings that support other not-for-profit organisations.
- Clydesdale Bank/Virgin Money – a free current account for any clubs or charities with less than £1m turnover a year.
- Ulster Bank – your account will be free for 24 months if your turnover is less than £250k.
- NatWest – accounts with NatWest are accessible to charities, museums, social enterprises, membership organisations, trusts and foundations with a turnover less than £100k, as long as one of the parties on the application is an existing NatWest customer.
- Lloyds Bank – Lloyds’ Treasurer’s Account offers a free day-to-day banking service for non-profits, such as charities, churches, clubs or societies with a turnover of less than £50k.
What other ethical financial products are available?
A number of investment services offer socially responsible investments, managed with performance and ethics in mind. These are often weighted towards businesses that conduct themselves in a fair and progressive way.
Fossil-free and climate aware funds are also available through green pensions. Providers often work with other sustainable investment funds to provide a socially responsible pension pot.
Frequently asked questions
Should I open an ethical bank account?
Whether you open an ethical bank account is a matter of choice, but an ethical current account could give you peace of mind that you’re banking responsibly. Each bank has different principles, so it’s important to check that their values match your own.
Many banks have tried to improve their image with charity donations and community schemes, but haven’t necessarily become ‘ethical’.
If you’re looking to open an ethical current or savings account, do a bit of research around the bank’s response to issues that concern you – and look out for independent accreditation.
Which bank is the most ethical?
If national awards are anything to go by, then the most ethical bank in the UK at present is Triodos Bank UK.
Adding to its past achievements, the popular eco bank was voted Best Ethical Financial Provider and Best Investment Provider at the prestigious 2022 British Bank awards.
Since receiving its UK banking licence in 2019, Triodos has pledged its commitment to three core themes: environment, culture and society. True to its sustainability mission, the bank provides support, investment and funding in areas like renewable energy, organic farming, and social housing.
Do ethical banks offer credit cards?
Many ethical banks in the UK don’t offer credit cards. For a lot of consumers, the fees on late payments and high interest rates might be considered irresponsible.
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Alex Hasty - Insurance comparison and finance expert
At Compare the Market, Alex has had roles as Commercial Associate Director, Director of Trading and Director of Growth. He’s currently responsible for the development and execution of Comparethemarket’s longer-term strategic options, ensuring the right breadth of products and services that meet customer needs.