Saving for the future
Tim Hunt and Dan Welch take a look at savings accounts for ethically-minded
consumers.
Not so long ago higher interest rates may have attracted savers to less ethical
but more remunerative institutions. But with interest rates at a historical
low, and with two-thirds of consumers saying they want to know more about where
their savings are invested, there's more reason than ever for savers to take
the ethical option. And our Best Buys are reporting strong growth, with Triodos
seeing both its balance sheet and number of customers grow by a quarter in 2008
alone.
None of our Best Buys offer a branch network, however, and for those that want
to be able to walk into a branch to deposit cash or for a face-to-face meeting,
there are a number of high-scoring building societies to choose from.
The main distinctions between the building societies are on environmental policy
and those that have subsidiaries in tax havens. After the Ecology Building Society
and Triodos, the Norwich and Peterborough are leaders in environmental policy
with our best rating, followed closely by Yorkshire with middle rating, and
in third place West Bromwich.
The Ecology Building Society provides a range of savings accounts administered
by post. Deposits are used to fund mortgages which promote sustainable housing
and communities. This might be through energy-efficient housing, ecological
renovation, derelict and dilapidated properties, small-scale and ecological
enterprise or low-impact lifestyles. The Ecology's innovative C-Change scheme
offers homeowners discounts off their mortgage rates for energy-efficient homes
— the higher the energy rating, the higher the discount. Since the credit
crunch the Ecology has seen a vast increase in savings (while assets and savings
had already increased by over 10% in 2007). Established in 1981 the Ecology
has 10,000 open accounts and assets of £74.9m.
Charity Bank was launched in 2002 as a member of the Charities Aid Foundation
(CAF) family and is the UK's only bank which is also a registered charity. Charity
Bank only lends to charities, voluntary groups and social enterprises with a
positive social purpose, and that may not be able to access finance on terms
they can afford. More than £80m loan finance has been provided to over
600 organisations, with its 2008 target for lending set at £18m. According
to chief executive Malcolm Hayday: "Because Charity Bank is transparent about
where it lends, our depositors know that their money is working responsibly
within communities throughout the UK. Disillusioned savers might want to consider
moving their money to a bank whose ethos focuses on generating social, not just
financial profit." Accounts are operated by post (account information can be
accessed by phone). As well as CAF, charitable foundations and funding bodies,
investors in Charity Bank include Barclays, Deutsche Bank and RBS.
Triodos only lends to businesses that promote or provide lasting positive
change. Their saver account links your savings with organisations that benefit
people and the environment, like organic farms, fair trade companies and charities.
For example they invested in the Scottish Isle of Eigg's renewable energy grid.
This combines wind, solar and hydro technology to provide residents with 95%
of their power needs. They are the only bank that is totally transparent about
who they lend to, which is phenomenal in a sector where little value is placed
on openness and accountability. This ethos of openness and positive change has
helped the bank to avoid the credit crunch, actually growing by 8% in the first
six months of 2008. It counts Amnesty International, Greenpeace, Friends of
the Earth, The Soil Association, and the Quaker Housing Trust among its key
business partners. Triodos started life in 1971 as a foundation to help generate
gifts and loans for promising new social initiatives and enterprises. In 1980,
with a full banking licence from the Dutch central bank and just 540,000 Euros
of start-up share capital, the bank itself came into being. Since then the bank
has grown and expanded and now operates in five European countries. In 1995
it launched its first green investment fund in the UK, and in subsequent years
has been responsible for creating the Humanist Institute for Development Cooperation
and a range of microfinance initiatives. Triodos Renewables was Best Buy for
alternative investments in our 2008
Ethical Investment report. It narrowly misses our best rating for environmental
reporting because its report lacks future quantified targets.
West Bromwich BS takes third place for environmental commitment amongst
the big building societies. Its procurement policy is designed to assess the
environmental and ethical policies of potential suppliers, and it's been rated
in the top 10 for companies nationally in terms of ethnic diversity in the workplace.
Yorkshire BS has detailed and impressive commitments to reducing its
carbon emissions, and sources energy for its branches and head office from renewable
resources. It loses a point for a subsidiary in tax haven Guernsey.
Newcastle BS has been praised for progressive policies on flexible working
and commitment to staff development and training. It also loses a point for
a subsidiary in Gibraltar.
Chelsea Building Society has grown to the fifth largest in the UK due
to a series of mergers over the years, most recently with Catholic Building
Society. The company receives the lowest rating for its environmental report.
This did disclose the company's carbon footprint, however, there was no mention
of any impact that its investments might have. Chelsea has a subsidiary, in
Guernsey, considered by Ethical Consumer to be a tax haven.
First Trust Bank is the Northern Irish subsidiary of the multinational
Irish AIB Group. Accounts can be managed by phone or online. First Trust does
a little better on environmental reporting than its parent, which appears to
have no environmental policy. Its Dublin HQ has won awards for its energy-efficient
Combined Heat and Power plant. AIB has subsidiaries in tax havens in the Channel
Islands and the Isle of Man. The company also gave excessive remuneration to
four directors; they each received over £1m last year. It gets an animal
rights mark for sponsoring horse racing at Ascot.
Skipton Building Society is the UK's sixth largest building society,
with 19 subsidiary companies operating mostly in the financial market. One of
these, Skipton Guernsey Limited, picks up an Anti-social Finance mark for being
based in a tax haven. There is no evidence of any environmental reporting or
policy on the company website.
Standard Life has impressive environmental policies and commitments
to carbon emission reductions, narrowly missing our best rating. An early signatory
to the Carbon Disclosure Project, the company is engaging with the Carbon Trust
to develop footprinting for its property portfolio. Its commitment to address
the indirect environmental impacts of its investment activities through its
'socially responsible investment' guidelines looks far from socially responsible
in light of investments in BP, Shell, British American Tobacco and Rio Tinto.
In September 2008, all of Bradford & Bingley's retail deposit accounts
(along with its branch network) were transferred to Abbey which is owned by
Banco Santander Group, one of the biggest banks in the world. The rest of the
business, including its mortgage operations, was nationalised.
As we were going to press, Dunfermline, Scotland's biggest building
society was broken up, with its savings accounts and branches coming under Nationwide's
ownership.
Social Lending
A number of innovative schemes allow you to lend your money for the benefit
of others. The disadvantage is that these schemes are investments, not savings,
with no guarantee should the organisation fail.
Shared Interest is a co-operative lending society working with fair trade businesses,
both producers and buyers, all over the world providing credit to help them
trade and develop. Shared Interest's 8,500 members have provided £22m
to fair trade partners. The level of interest paid to investors is determined
from time to time by the directors (currently 0%). See www.shared-interest.com
or call 0191 233 9100.
Several schemes take advantage of the latest internet and peer-to-peer technology.
Zopa.com has been described as
eBay for money. In March this year there was just over £2m available for
lending. According to CEO James Alexander: "We risk assess, identity and
credit check every individual that comes to Zopa. So it's a community of known
individuals and what Zopa does is connect these people so they can borrow and
lend money on their own terms." Zopa also spreads your loan among borrowers
to reduce risk. Co-founder Giles Andrews says, "Our default rates are low
because we buy more data from the credit reference bureaux that anyone else,
and there is something in the social side of Zopa — borrowers are committed
to repaying their lenders." Lenders earn an average interest rate of 8.9%,
higher than the best fixed-rate bonds with higher-risk loans paying 14% or more.
On the downside lenders don't select who they lend to, so funds can't be directed
on ethical criteria. Several peer-to-peer lending sites have closed to new applicants
in the face of the financial crisis. LendingClub.com
is still operating, while LoanBack.com
helps those who would be lenders and borrowers who already know each other formalise
an agreement, and organize payment schedules, late-payment fees and other contingencies.
But social lending is not just for people looking for a monetary gain. The
social lending site Kiva.com allows lenders
to give to entrepreneurs in majority world countries. It's a type of peer-to-peer
microfinance. Kiva says itsr mission is to "connect people through lending
for the sake of alleviating poverty". Kiva lets lenders sponsor a business
by choosing from thousands of cases detailed online. Lenders can see who they
are lending to and receive e-mail updates about how borrowers are doing. Lenders
receive no interest but the satisfaction they are helping borrowers improve
the quality of life for themselves, their families, and their communities.
Post Bank Campaign
A coalition of unions, small businesses, charities and campaign groups, including
the New Economics Foundation have launched a campaign for a ‘people’s
bank’ built on the Post Office network. The proposed Post Bank would:
- provide more financial services to people and businesses not served by high
street lenders, particularly the three million people not using banks and
small businesses looking for alternative sources of finance
- make the Post Office network more viable and create new job opportunities
- ensure a stable source of finance in the heart of communities and a return
to the ‘relationship banking’ abandoned by our biggest banks.
Triodos poll
According to a recent poll commissioned by Triodos in the wake of the credit
crunch:
* two-thirds wanted to know more about where their money is invested
* 6 out of 10 said interest rates were no longer their main concern with savings
* 38% said they would consider a lower interest rate if they knew their money
was being used in a more socially or environmentally responsible way.
Price comparison
This table looks at interest on £500 in branch instant access savings
accounts. Some institutions did not have branch-only instant access accounts
but most did, therefore it is open access branch unless otherwise stated. Most
institutions also allowed a minimum deposit of £1: this is the case in
the table unless otherwise stated.