The word ‘ethical’ in relation to banking tends to mean different things to different people. Some are primarily concerned with the level of customer involvement, while some are more concerned with how their money is invested, and others with how communities benefit from any profits.
Unsurprisingly, many of the organisations that make it onto list of ethical banks are co-operatives. Desjardins Group, for example, is a federation of ‘caisses’ (similar to credit unions) and is classed as the leading co-operative financial group in Canada. Members can attend AGMs, vote on issues such as by-laws and what to do with profits, and elect officers to the board of directors. In 2014, Desjardins reinvested $82.3 million in communities, in the form of donations, sponsorships, and philanthropic partnerships and scholarships. This year it was given the Co-operative of the Year award by Co-operatives and Mutuals Canada for its contribution to the movement.
“By their co-operative nature, each of the caisses in the Desjardins network is anchored in its neighbourhood and works to respond to its members’ needs,” says Sophie Morin, director of co-operation, affairs and social responsibility at Desjardins Group.
“Each caisse is committed to its local community and the caisses unite their forces to support larger scale regional projects and actions. Desjardins Group also plays an important role at the national and international level, as it is involved in major national issues and supports cooperative development in Canada and elsewhere in the world.”
Bank Australia, (formerly Bankmecu) is Australia’s first customer-owned bank and the only Australian member of the Global Alliance for Banking on Values (GABV), a global network of sustainable banks. Bank Australia is carbon neutral, invests up to 4% of profits back into the community, and has purchased almost 1,000 hectares of land to create a conservation reserve to protect native species.
“We see the business of banking a little differently to our competitors,” says Damien Walsh, Bank Australia’s managing director.
“Being sharp on price and making a profit is important to us all. But we believe money should also be put to good use, creating positive social, environmental and cultural outcomes. Not being bound by the demands of investors means we act in the best long-term interests of our customers. We respect their point of view, which is why our customers each have an equal say in how we go about our business.”
According to the European Association of Co-operative Banks (EACB), co-operative banks represent 78 million members and 860,000 employees, and have an average market share of around 20%.
The Crédit Coopératif Group in France, another member of the GABV, states that it has ‘the largest existing range of ethical and solidarity-based banking products and investments in France’. In Denmark there’s the Merkur Cooperative Bank, which finances ‘profit making enterprises within sustainable production, and not-for-profit institutions and associations within cultural and social fields.’
Several banks were recognised in Ethisphere’s World’s Most Ethical Companies list in 2015: Banco do Brasil S.A., National Australia Bank, Teachers Mutual Bank (Australia), Old National Bancorp (USA), and U.S. Bank.
U.S Bank call itself “one of the most compassionate and community-centric banks in the industry”. In 2014, the bank invested or loaned $4bn to the community, including more than $23.5m in grants; and their 67,000 employees volunteered for a total of 370,000 hours. “Our commitment to high ethical standards guides everything we do,” says Jennie Carlson, executive vice president, human resources. “This commitment defines who we are today and drives how we’re managing, investing and innovating for the future. It drives the core values that shape our culture and brand.”
There has been a lot of speculation over the last year about how ethics would be affected at the Co-operative Bank, following its separation from the wider Co-operative Group. The bank’s recent values and ethics report which reports on the impact of its ethical policy, along with changes to some of its services and the support it has shown the co-operative movement. The bank remains one of very few in the world which has ethical policies clearly setting out the types of organisations that they will not lend customers’ money to. The policy was strengthened in January, with the added commitment not to finance tax-dodging organisations or those involved in irresponsible gambling or payday loans.
However when it comes to ethical lending, it’s Triodos Bank that really leads the pack. It only lends to ‘organisations that make a difference to people and the planet’ and publishes a full list of every organisation it lends to or invests in. Triodos operates in several European countries and offers a range of personal and business banking services, including current accounts for businesses and charities. Triodos is a co-founder of the GABV.
Huw Davies, head of personal banking, says: “At Triodos Bank we offer savers and investors the chance to feel good about their money.”
There are also many examples of smaller banks which are making a contribution to ethical finance and the co-operative movement. Bank Persatuan in Malaysia, for example, pays a dividend and also operates several welfare schemes for its members, from grants that help members suffering from chronic illnesses, to education bursaries.
In the UK, Ecology Building Society offers ethical savings accounts, along with mortgages for sustainable building projects, such as eco-builds, renovating derelict properties and installing renewable technologies. The building society also lends money for some commercial projects, such as organic smallholdings and farms, community businesses and housing co-operatives. Ethics are deeply rooted in the society. For example, the highest paid employee can only earn a maximum of five times that of the lowest paid employee. Ecology Building Society comes top in Ethical Consumer’s ethical ranking of UK banks.
From a business perspective, banks are finding that an ethical approach can also be good for business. Desjardins Group was the highest ranking North American bank in Bloomberg’s World’s Strongest Banks list this year.
And ethics can attract customers, too. “There’s strong demand from savers and investors to support more sustainable sectors,” says Huw Davies, “and also to divest from unsustainable businesses and environmentally damaging practices, especially among the younger generation. However, a lack of awareness of how money may be used by banks means many people might actually support industries they are ethically opposed to through their ISAs and other investments.”
If you are considering moving your custom to an ethical bank, the following sites may be of help:
This focus on ethical finance is authored by Co-operative News, with support from Ecology Building Society. Ecology (www.ecology.co.uk) provides mortgages for environment-friendly properties, community enterprises and co-operatives, funded through its simple, ethical savings accounts. www.thenews.coop/ethicalfinance