Ethical Banking

What is ethical banking?

Banks choose where to provide financial support, in the form of loans, investments or insurance. This support determines whether corporations can build an oil rig, expand their munitions production or develop their wind farms. In other words, it decides what our economy, industries and planet look like now and into the future.

Ethical banks avoid funding the most toxic industries and redirect the money to companies or organisations that are doing something positive.

More and more banks are developing ‘ethical investment policies’. Most often, these policies will say what the bank can’t fund – for example, they may not be allowed to fund nuclear weapons.

Some high-street banks are making a lot of noise about these policies without actually making major steps towards change. For example, they may only rule out the very worst of industries, such as cluster munitions (which are banned under international law), or leave their policies riddled with loop-holes so they can still channel money to fossil fuels.

What are the the most ethical banking policies?

The best ethical policies can really determine the direction of a bank’s finance. For example, they might include:

• no funding of fossil fuels
• no funding of animal testing
• zero tolerance of human rights abuses

A truly ethical bank will also finance more ethical alternatives, such as solar panel companies or more sustainable farms. This positive lending and investment is crucial because it creates the infrastructure we need for a greener future.

At Ethical Consumer, when deciding whether a bank is ethical, we also look at other issues, such as whether it is dodging tax or increasing inequality through excessive pay of directors or unequal pay e.g. for women or ethnic minorities.

Is ethical banking important?

Banks have an enormous amount of power and wealth. The four largest UK banks recorded pre-tax profits of over £45 billion in 2024. They therefore hold massive sway over the nature of our economies.

The decisions they make now have long-lasting repercussions. An oil rig funded in 2025 will last for 20 to 30 years. On the other hand, renewable infrastructure also has a long lifespan and needs a high amount of upfront investment, making banks’ support vital.

On a consumer-level, ethical banking is also important, even if you think your savings aren’t worth much. For every £1 a bank holds, it can lend out £9. 

This means that if you have £15,000 in savings (the median amount of savings for a UK household), your financial provider can lend out £135,000 to either clean or dirty industries.

Ethical banking therefore offers a chance to both align your money with your values and make a really meaningful impact.

Ethical banking and climate change

Banks around the world are pumping money into fossil fuels, making them a key culprit of climate breakdown. Since the Paris Agreement, the world’s 65 largest banks have provided USD $7.9 trillion (£5.8 trillion) in financing to the fossil fuel industry.

Ethical banks are reversing this trend by refusing to fund fossil fuels, or at their best, funding our transition to clean energy through solar, electric vehicles and other shifts.

We expect banks to have a policy against fossil fuels, be reporting their emissions including from their investments, and to have a target to reduce emissions and be taking real steps towards meeting it. Ethical Consumer rates all banks on their climate impacts in its guides.

In the guide to current accounts, the four largest banks in the UK (HSBC, Barclays, Lloyds, and NatWest) all scored 0/100 in Ethical Consumer’s climate rating. 

Check out the banking guide to find out which companies did best >

Which banks are ethical?

Deciding which banks are more ethical will depend on your personal priorities. The Ethical Consumer guides to current accounts, saving accounts and small business accounts provide information on everything from fossil fuel investments to tax avoidance, as well as recommendations.

There are nonetheless some standout options. Triodos has a market-leading ethical investment strategy, and is impressively transparent on where its money goes. It gives a list of all 550-plus projects that it funds, from a social housing association in Bradford to a wind turbine project in Swansea.

Ecology Building Society is also a great option. It offers savings and small business accounts and focuses on funding projects to make homes more energy efficient, as well as supporting community-led affordable housing.

The Ethical Consumer guides also highlight other ethical options such as building societies, including high street brands like Cumberland which may not be as ethically focused but are avoiding the worst investments.

Are high street banks ethical?

In recent years, many mainstream banks have taken small steps towards more ethical lending and investments, by developing ethical lending policies. However, the Ethical Consumer guide to current accounts has repeatedly found that good policies don’t always lead to good practices. 

In fact, it uncovered multiple instances in which high street banks had either published weak policies, or simply ignored them.

NatWest was found to have a policy that allowed it to continue investing in or lending to certain “restricted” activities, as long as it conducted due diligence audits. “Restricted” projects include for example deep sea trawling and Arctic oil extraction, as well as any oil and gas company with a “credible transition plan”. 

Likewise, while HSBC promised to stop financing deforestation in 2017, Global Witness listed the company among banks still making billions from activities linked to deforestation in 2025. The campaign group stated that HSBC was “linked to mass deforestation in Paraguay and found to have been the largest UK financer of “forest-risk” companies.”

In fact, of the largest seven UK banks (Barclays, Halifax, HSBC, Lloyds, Nationwide, NatWest, and Santander), Nationwide was the only one to receive a score of more than 6/100. All six others still invest in fossil fuels as well as arms companies.

Are digital banks ethical?

At the moment, some of the digital banks in the Ethical Consumer current accounts guide score in the mid-range for ethics. However, this may be because they are still relatively small, and it will be interesting to see if their principles evolve should they capture more of the banking market.

Should I switch to an ethical bank?

Moving your money is quite possibly the easiest way to have a big impact on the world as an ethical consumer. It offers a chance to align your money with your values, ensure you’re not funding the climate crisis, and address other key areas of concern from animal exploitation to the arms trade.

If you’re with one of the UK’s major banks – Barclays, Halifax, HSBC, Lloyds, NatWest, or Santander – you should consider switching.

While Triodos has a low monthly charge, most ethical banks are free to open an account with. They generally also have better customer satisfaction scores, according to Which?

Is it difficult to switch to an ethical bank?

Switching banks is remarkably easy once you’ve found the right one for you.

When you open a new bank account, it will usually ask you during the application whether you want to switch. If you do, by providing the details of your old account, the switching service will move your money, direct debits and standing orders across, and close your previous account. It will also transfer any payments meant to go into your old accounts, for example your salary. All this takes just seven working days.

For at least three years, any money paid into the old account or wrongly down to come out of that account will be moved across into the new one.

Current Account Switch has a guide on how to make the move.

If you are switching accounts for ethical reasons and want to write to your previous bank to let them know why, we have published a template letter for you to use.