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Where can I open an ethical current account?

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Written by:
08/10/2019
To mark Good Money Week, we delve into the world of ethical bank accounts and discover what options are out there.

Recycling, switching the lights off around the house, and avoiding single use plastic bags are a few ways to live a more sustainable life.

But how can you make sure your money is being used as a force for good?

One way is to open an ethical bank account.

Ethical and banking may not be two words you’d naturally put together, but the banking sector is gradually cottoning on to the notion that some customers want a current account aligned with their values.

An ethical bank is one that invests its customers’ money in a way that positively impacts society, the local community or the environment.

“Which ethical bank you choose is entirely down to personal preference, as what you’re looking for in a bank depends entirely on your values,” says Sally Jacques, money and banking expert at GoCompare.

Ethical brands aim to be transparent about how they invest their customers’ cash.

Some will explicitly state they avoid sectors such as arms, tobacco or fossil fuels, while others will invest in schemes that benefit society such as renewable energy or local housing projects.

They may also be open about how they treat staff and customers.

100% transparent

According to research firm Ethical Consumer, Triodos Bank is currently the best buy for current accounts because it is “fully transparent about its investments” and “ahead of the field both in terms of its environmental and social commitments”.

The Bristol-based bank believes in 100% transparency and only lends money to organisations it thinks make a difference to people and the planet with positive social change.

The account costs £3 a month and can be managed online or by app. It also comes with a debit card made from 100% renewable resources such as plant leaves and corn.

Gareth Griffiths, head of retail banking at Triodos Bank UK, says: “Typically, banks fund their free accounts with hidden costs and high charges on overdrafts – often with financially vulnerable customers footing the bill.

“We don’t think that’s right or fair, because there is no such thing as free banking. Our £3 monthly fee goes towards the cost of running a current account and is shared equally by all our current account customers.”

If you’d prefer a fee-free account, Co-op Bank has a “sector-leading ethical policy”, according to Ethical Consumer.

Co-op Bank recently reinstated its commitment to ethical banking despite changes in leadership in recent years, including being majority owned by hedge funds.

The bank has a customer led ethical policy, which includes not providing services to organisations that conflict with customers’ views on a range of issues, for example: human rights, the environment, international development and animal welfare.

The Co-op free current account offers access to a rewards scheme, which pays you up to £5.50 a month as long as you stay in credit, have paid in at least £800, remained paperless, have four direct debits coming out of the account and have checked your account online or through the app. You can opt for this to be paid to you or to a charity of your choice.

Islamic banks

Sharia-compliant banks are another option. Al Rayan, Habib Bank, BLME and UBL all offer current accounts and are registered under the Financial Services Compensation Scheme, which protects up to £85,000 of your money.

These banks follow Islamic law, which means they don’t pay interest, so don’t lend your money out to other customers. Instead it is invested, but investments exclude any businesses seen as harmful under Islamic law such as those in the gambling, tobacco, alcohol or arms sectors.

Finally, you could consider building societies.

Ethical Consumer suggests Nationwide and Cumberland, two member-owned and run building societies.

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