Ethical banking has gained popularity in recent years as people lose trust in big banks that engage in unsustainable investments, such as fossil fuels. If you’re looking to divest from your old bank and switch to a more ethical one, look no further. At Aspiration, we have put together a list of the most ethical banks and financial institutions you can switch to today. Aspiration is an ethical financial services company that puts transparency and community at the heart of what we do. Read on below for what makes a socially responsible bank and our ethical bank recommendations.
What is Ethical Banking?
An ethical bank, also known as a sustainable or socially responsible bank, does not engage in any investment or lending practices that harm the environment or human lives. Ethical banks are driven by strong policies that keep them socially responsible while staying profitable. They tell their customers upfront that they don’t invest in fossil fuel companies, firearms manufacturers, tobacco companies, and private prisons. Instead, they focus on investing in partnerships that strengthen communities and reduce climate change. This is one of the reasons that most ethical banks are also present in lists of ESG banks.
Some ethical banks invest in housing for economically vulnerable communities. While others fund renewable energy projects that help communities transition to low-carbon economies.
Why should I bank with an ethical bank?
The four biggest banks in America lend more than $210 billion of their customers’ money to fossil fuel projects, every year. What sets ethical banks apart from their traditional Big Bank cousins is that they are active financiers of the transition to a fairer, more sustainable economy. It’s this key trait that helps them build trust with customers who want a better world to live in.
Banking with an ethical bank means making a difference with your spending. If you consider yourself an ethical consumer or feel passionately about social initiatives, choose a financial institution that aligns with your values.
What features should I look for in an ethical bank?
As more ethical banks appear in response to the socially conscious movements of today, it’s important to know what metrics make a truly ethical bank.
The five key metrics used to determine the ethical value of a bank are:
1. Ethical investment options and transparency
The most ethical banks publish their investment portfolios so customers can see where their deposits might be loaned out to. They may also offer an “ethical fund” or similar financial product that aligns with the values of an ethical consumer. For example, a financial institution may refrain from investing in fossil fuels, private prisons, or firearms in exchange for clean energy promotion and pollution prevention. They also have excellent customer service representatives who are helpful in answering any ethical concerns that customers may have.
2. Timely tax payments – a social responsibility
Ethical banks also pay all their taxes on time. They’re markedly different from many traditional banks that have tax avoidance strategies. These bigger banks have subsidiaries operating out of tax havens such as Luxembourg and Switzerland so they can get the most out of their profits.
3. Fair treatment of its staff and customers
The welfare of a bank’s staff and customers is a very important metric that might be sometimes overlooked in favor of more eye-catching policies. The most ethical banks pay their staff fair wages and ensure small differences between managers’ salaries and those of other employees.
4. Clear policies to not harm the environment or human lives
Ethical banking is environmental banking which is why ethical banks should have clear, explicit policies that bar them from funding businesses and projects that degrade the environment and pose risks to human lives. They must work to help create a fairer society for all communities, regardless of religious and socioeconomic backgrounds. At Aspiration, for example, we do not fund any investments related to fossil fuels. We believe that it’s our responsibility to protect the planet’s ecology so future generations may live healthy, fulfilling lives.
5. Ethical accreditation – Certified B Corp or other certification
Ethical banks should also have certifications that reflect their legal accountability to corporate ethics. B Corp certification, The Global Alliance for Banking on Values (GABV) association, and Community Development Financial Institutions (CDFI) certification are internationally recognized accreditations that ensure that a bank maintains transparency and works towards positive social impact.
What are the top ethical banking institutions?
If you’re looking to switch from your old traditional banking ways to a more ethical approach, here’s a list of the world’s ten most ethical banks and financial institutions:
Aspiration is not a bank; we are a B Corp certified financial institution that does not invest in fossil fuels, weapons, and private prisons. Founded in 2013 under the guiding principles of trust and transparency, Aspiration is a banking alternative that lets customers know where their money is being invested in to combat climate change and help vulnerable communities. Our customers have the option to round up every purchase to the nearest whole dollar to plant a tree. What’s more, the Aspiration app gives businesses a sustainability score, called an Aspiration Impact Measurement, that helps customers know if the business they want to spend money with matches their personal sustainability values. Customers can choose their own monthly fees, 10% of which we donate to charity, and they can subscribe to a plan that gives them various perks, like carbon offsetting for every gallon of fuel purchased. For those interested in opening an account with Aspiration, you can get up to 5.00% APY on savings.
2. Amalgamated Bank
Amalgamated Bank is a New York-based bank that focuses on strengthening communities through renewable energy efforts and affordable housing initiatives. Over the years it has funded hundreds of progressive political campaigns, from Joe Biden’s presidential campaign to Bernie Sanders’ bid for the presidency. Amalgamated is 40% owned by the Workers United union, making it a unique member of the banking community. It was the first bank in the country to raise the minimum wage of its employees to $20/hour. They are members of both the GABV and the B Corporation, so you can rest assured that any money deposited with them are tobacco-free, fossil fuel-free, and invested in 100% renewable energies.
3. Spring Bank
Spring Bank is a B-Corp bank based in New York that offers transparent and affordable banking products and services to small businesses and underserved customers. Using innovative depository and loan products, this bank works to help take its customers out of debt. They offer loans to entrepreneurs and small businesses in New York City, from microloans to multi-million dollar funding, to help create new jobs and keep wealth in the communities that need it most. Spring Bank is FDIC insured and popular with many small businesses in New York.
4. OneUnited Bank
OneUnited Bank is America’s largest black-owned CDFI bank. Founded to empower the black community and close the racial wealth gap, OneUnited offers financial services throughout the United States that help underserved community members hold on to their wealth. Its BankBlack Early Pay service, for example, allows customers to withdraw their pay 2 days early. OneUnited also organizes financial literacy programs to help black community members understand how to manage their wealth. OneUnited Bank offers savings, checking, and credit card accounts that are affordable and accessible.
5. Beneficial State Bank
Beneficial State Bank is a banking leader among nonprofit organizations, particularly in the Pacific Northwest. They focus on building safer communities by supporting socially conscious movements, such as the call to end police violence. They do not provide any loans or services to entities involved in the prison industry and have been moving their money out of prisons together with other changemakers. The money is being invested instead of improving the lives of traditionally underserved Black, Brown, Indigenous, and People of Color community members. In addition to social equality, Beneficial State Bank funds environmentally regenerative projects to ensure a safer future for everyone.
6. Sunrise Bank
Sunrise Bank operates to the highest standards of transparency and accountability. The Minnesota-based bank is certified by the B Corporation and the CDFI and is a member of the GABV. The bank focuses on driving social projects that improve the lives of community members across the country. Since 1986, Sunrise Bank has invested in partnerships with social enterprises, fintech companies, and community leaders to “solve issues of financial inequality”. They prioritize a strong attachment to the community, even giving their employees up to 40 hours of paid volunteer time off. Sunrise provides banking services for individuals and corporations and offers savings, checking, and credit card accounts.
7. Triodos Bank
Based in the Netherlands, Triodos Bank is a leading ethical bank with branches in the United Kingdom, Spain, Belgium, Germany, and France. It’s considered by many experts to be the most transparent bank in Europe, offering its customers and investors details of every entity it lends to. Triodos only invests in organizations that deliver positive change. From businesses that combat soil degradation to organizations that build affordable housing, Triodos supports them with loans and other financial services to help them enable change. Opening a current account with Triodos costs £3 (roughly $4) per month and this allows you to get an overdraft of up to £2,000, or about $2,700. Customers can access the bank online and via the app, but physical bank branches are not yet available in most European countries where Triodos operates.
8. Bank Australia
Bank Australia is a completely fossil fuel investment-free bank based in Australia. Unlike traditional banks, Bank Australia is owned wholly by its customers. Any profits generated from its financial services are given back to customers through better interest rates and bank fees. They are committed to using banking as a tool for positive social change. They do not lend any money to the fossil fuel industry or to farming businesses that abuse animals. Instead, they invest in renewable energy and community and disability housing. Bank Australia is a certified B Corporation as well as a leading conversation organization that protects Australia’s biodiversity.
9. Bendigo and Adelaide Bank
Bendigo and Adelaide Bank is another Australian bank that does not invest in fossil fuels, particularly the coal sector. Their core focus is on community lending, which helps keep wealth in communities. They avoid financing companies with links to gambling, the global arms trade, animal smuggling, and human rights abuses. They have a policy of supporting sustainable livestock farming practices and encouraging their customers to abide by their policy regulations.
10. Starling Bank
Starling Bank is an app-based UK bank that offers customers personal and business current accounts. It’s popular among users who like to track their spending and receive regular analyses of their spending habits. Just like most of the other banks on this list, Starling has a ‘do no harm’ policy. It does not lend to any companies involved in arms manufacturing, tobacco production, and fossil fuels. Customers can access the bank via the app, which is hosted by Amazon Web Services (AWS), a carbon-neutral cloud storage service.