Bank on something better
In April 2012, the Ethical Consumer research team looks at some of the great ethical options available for savers.
Across the world of personal finance, the good news is that ethical options also commonly rate highly for value and service. In January 2012, for example, the top five interest rates available for saving accounts on the Which? website were:
- Santander 3.1%
- Skipton BS 3.05%
- Leeds BS.01%
- Post Office 3.01%
- Principality BS 2.85%
Next to Santander’s entry was a Which? ‘warning’ of a bottom rating for poor customer service. The top six accounts for customer satisfaction were: First Direct, Co-operative Bank, Yorkshire BS, Barnsley BS, Yorkshire Bank, Principality BS. There is a strong correlation between these highly rated providers and the top ten ethical companies on our score table above.
This, as well as the banking crisis, may well have something to do with growth in ethical savings generally. The Co-operative Bank’s 2011 Ethical Consumerism Report shows that the value of money in ethical savings and investments increased by 9% in 2010 to £21.2bn. Money in credit unions also increased over the same period from £579m to £653m.
Building societies and credit unions generally score well in our Buyers’ Guides. This is because they are effectively restricted by law from the kind of controversial investments detailed elsewhere in this report. The smaller regional building societies and credit unions offer local branches and the opportunity to support the local economy.
A super-ethical niche
The savings account market is also lucky to have three innovative organisations looking to lever the power of people’s savings for positive social and environmental change.
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 which may not be able to access finance elsewhere on terms they can afford. 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.”
As well as CAF, charitable foundations and funding bodies, investors in Charity Bank include Barclays, Deutsche Bank and RBS. Accounts are operated by post, but account information can be accessed by phone.
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. We cover it in more detail in the Mortgages Buyers' Guide.
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, the Bank invested in the Scottish Isle of Eigg’s renewable energy grid which combines wind, solar and hydro technology to provide residents with 95% of their power needs.
Triodos are the only bank that is totally transparent about who it lends to, with a full list of loans now available on its website. This is a phenomenal initiative in a sector where little value is placed on genuine openness or accountability. This ethos of openness and positive change has also helped the bank to avoid the credit crunch. In fact it has been growing consistently – its equity rose from €126 million in 2006 to €362 million in 2010. It counts Amnesty International, Greenpeace, Friends of the Earth, The Soil Association and the Quaker Housing Trust among its key business partners.
Since our last report, Triodos has taken to disclosing its investments in stock-market listed multinational companies it describes as having ‘above-average environmental, social and governance’ (ESG) performance, including Johnson & Johnson and Vodafone. Its investment services, for private banking activities and also the Triodos SRI funds, are separate from its savings and lending facilities. It publishes its voting history on its website and through active shareholder engagement “it aims to raise awareness of sustainability issues and motivate change.”
As we mentioned in Current Accounts, best practice engagement means that such shareholdings don’t contribute to negative marks on the table. However Triodos’s ‘best in sector’ approach, which leads to holdings in the likes of BMW, seems a slightly strange route for such a strong alternative brand.