Choosing an ethical current account is increasingly recognised as a way of helping everything from tackling climate change to socially responsible businesses, and the number of banks offering them is growing.
But what about savings accounts and how do you go about choosing an ethical savings account?
Here Rob Harrison of Ethical Consumer, shares five top tips for choosing an ethical savings account, whether you're an individual, business or organisation:
1. Avoid fossil fuels
The first thing to consider is that many mainstream banks are now actively financing companies in the fossil fuel industry, which in turn is directly contributing to climate change.
In Ethical Consumer's latest product guide to ethical finance we found that virtually all the big high street banks, including Barclays, HSBC and Santander, were involved in lending to companies involved in the production of fossil fuels.
If you're concerned about climate change, which is the biggest environmental issue now facing the planet, then avoid putting your savings with a bank that's making the issue worse.
2. Look for positive lending
It's a good idea to go for financial institutions which have ethical lending policies that focus on projects that have environmentally and ethically positive impacts. In this way, there's a guarantee that your savings are being put to good use.
For example, the Ecology Building Society focusses its lending on supporting sustainable housing practises.
Triodos Bank supports a wide range of environmental projects from organic food and farming businesses to recycling and renewable energy enterprises.
Charity Bank has a strict policy of only lending to charities, social enterprises and organisations with a charitable aim.
3. Reward transparency
At Ethical Consumer we believe that it's vital that banks disclose who they lend their money to. As investors and savers we need to be sure that our money isn't causing damage or is being lent to a company whose practices we don't agree with.
Mainstream banks are stubbornly resistant to being open and transparent with the result that virtually all high street banks scored badly in our ratings on disclosure.
Just two, Charity Bank and Triodos Bank, gained the top score since they publish a loan portfolio to show everyone who they lend to.
4. Avoid tax avoiders
Another key ethical issue to consider is whether a bank is avoiding paying their fair share of tax. We've ranked banks on their likely use of tax avoidance strategies and found that many high street banks including HSBC, Santander and Tesco Bank gained the worst rating.
Financial institutions that gained the best rating included Charity Bank, Co-op Bank and Triodos.
In 2016, Ecology Building Society went one stage better and became the first financial institution to receive the Fair Tax Mark in recognition of their openness and transparency of its tax affairs.
5. Look out for excessive directors’ pay
Finally, you may want to avoid banks that pay their senior staff excessive pay. In our survey of directors' pay we found that most high street banks paid their directors in excess of £1 million a year.
With the notable exception of the Co-op Bank, our view is also that for financial companies there's a correlation between high executive pay and a low ethical performance.
On the other hand, Charity Bank, Triodos Bank and virtually all building societies pay their directors less than £1 million.
Rob Harrison is co-editor of Ethical Consumer
Launched in 1989 Ethical Consumer is the UK's leading ethical and environmental magazine. In each issue Ethical Consumer examines the ethical and environmental record of the companies behind everyday products and services from bread to banks.
Last reviewed: 29/04/2020