The widening gap
Since our last report on this sector, the gap between ethical and unethical banks has grown significantly. There is now a 5 point gap in the middle of our table, between ICICI (6.5/20) and Al Rayan (11.5/20).
This growing gap proves that the UK’s largest banks are falling further behind on ethics. Since our last report, 75% of the ethical choices in this market have improved their Ethiscore. Whereas, of the big five, only Barclays managed to improve their score, albeit from a measly 1.5 to 3.
Clydesdale Bank and Yorkshire Bank are this guide’s biggest movers. Impressively, their Ethiscores rose from 6.5 in 2016 to 12.5. This sharp increase is due to a change of ownership, with previous owners the National Bank of Australia exiting the UK market and handing over control to the newly formed CYBG.
The ethical and the super-ethical
In the murky world of finance where profit often trumps ethics, readers should consider banks which receive an Ethiscore of 11 or above as solid ethical choices. This leaves a variety of building societies and banks to choose from. The vast majority of these are only marked down under Anti-Social Finance and Environmental Reporting.
There is however a stand out choice for ethical business consumers in the UK to consider; our best buy Triodos. Not only do Triodos not lose a single mark, they also pick up positive marks for its transparency and company ethos. Moreover, Triodos have recently been awarded the Ethical Consumer Best Buy label in recognition of its pioneering ethical approach to banking.
This product guide’s other two Best Buys are Unity Trust Bank and CAF Bank. Unity Trust focuses on social enterprises, co-operatives and trade unions. Whereas CAF specialise in charities and not-for-profits.
A spotlight on de-risking
One of the main ethical issues in the charity banking sector is de-risking. This is a process by which banks, prompted by regulators (governments), seek to reduce ‘risk’ in their client portfolios.
Stemming from the 2001 September 11th twin towers attacks, and perpetuated by the growing fear of terrorism and money laundering, de-risking is one of the methods regulators have employed to curtail funding finding its way to terrorist groups. Unfortunately, this policy has had serious repercussions for the charity sector.