Background to the issue
It is fairly well understood that every purchase has environmental and social implications. What is less known is that our money in the bank is used to provide loans to other companies. The companies receiving these loans are selected by our banks, and therefore we do not have direct influence over them.
Unfortunately, high street banks commonly make questionable decisions when deciding which companies to fund. Our money is often used to fund the fossil fuel industry, and therefore, we may unknowingly be contributing to the further extraction of fossil fuels! UK banks have invested nearly £150 billion into fossil fuels since the Paris Climate agreement in 2016, with the following banks consistently demonstrating unethical and environmentally destructive practices (according to Ethical Consumer):
- HSBC (including First Direct and M&S bank)
- RBS (including NatWest and Ulster Bank)
- Lloyds (including Halifax and Bank of Scotland)
Similar patterns can be seen in pension investments, whereby our money in pensions is used to fund unethical environmental practices.
What can we do?
We as the consumer have a great deal of power over the market. By making ethical choices about what we buy, we send a message to the supplier about our values. In this way, we have the power to make eco-friendly products more readily available on the market whilst phasing out environmentally destructive ones. Ethical and environmental standards (e.g. Corp B, Fairtrade or ISO14000) can be a good way of determining whether products are sustainable. Ethical consumption is particularly important in a business setting where products are bought in large volumes.
As an individual however, the best way to use your money ethically is to reduce consumption as much as possible. Consider whether you can borrow or fix things before resorting to buying new.
Furthermore, while we can’t directly control where our banks invest our money, we can take direct action by switching to banks which don’t invest in fossil fuels (both for current and business accounts). Better still, we can select banks that only invest in environment improving activities (e.g. Triodos bank invests in countryside restoration and renewable energy). Other important things to consider when changing banks are: Do my bank’s practices breach human rights? Is it funding the firearms trade? Does it avoid paying its fair share of tax?
You can maximise your positive impact by informing your original bank about your reasons for leaving, in the hopes that it will convince them to divest from fossil fuels and change their practices.
These are the top 5 most ethical banks according to the good shopping guide:
The same applies for pensions, ISAs and other investments. You have control over where these investments are made!
Articles and websites to widen your knowledge
Fossil fuel funding
The graph below displays the global banks which contributed most to the fossil fuel industry over the past three years (2016-2018). Barclays contributed a total of $85 billion dollars ($24 bn in 2018 alone) whilst HSBC contributed $57 billion ($18 bn in 2018). Santander also heavily funded the fossil fuel industry contributing ~$15 billion from 2016 – 2018.