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7 Best Ethical Banks (UK)

Having a bank account is practically a necessity for modern life. Whether you want to apply for a job, find housing, open credit accounts, and more, most people need a bank account to function in daily life. As such, most people will have to do business with banks. 

Banks, like any business, interact with several parts of the economy and broader society, with great effects. As such, many people would prefer to keep their money with banking institutions that are dedicated to producing positive social effects.

Socially responsible banking, also called ethical banking, is a new banking paradigm that seeks to change the consciousness of how banking operates in the modern-day.

We’ve put together this list of the best ethical banks to consider in the UK, and what features they offer. We will also talk about what makes each bank ethical and how they strive to produce social good.

What is Ethical Banking?

But first, let’s answer the main question: What is ethical banking?

Ethical banking is a new paradigm among financial institutions that seek to reorient how banks affect society and the environment. The basis of ethical banking is that banks and other financial institutions structure their business and activity to emphasize ethical practices at every point in the business arrangement. 

The term ethical banking is fairly broad and can encompass a wide range of practices directed at maximizing social good. For example, a bank that makes an effort to provide start-ups and financial assistance to local and small businesses as part of its mission statement might be seen as partaking in ethical banking. 

One can think of ethical banking as adherence to ethical principles and values that supersede the desire to make a profit. While ethical banks are still businesses and do make a profit, they balance the interests of their shareholders with the interest of broader society. 

As the nature of ethical banking is broad, each bank will implement what their vision of ethical banking is. However, several commonalities between banks emphasize ethical practices, including but not limited to community involvement, internal ethical consistency, and client screening.

Ethical banks also try to build strong financially independent communities and are transparent in their dealings with individuals and the communities.

What’s Wrong With High Street Banks?

So, what’s so wrong with traditional banking institutions, anyway? Well, a lot of people don’t realise this but banks don’t just let your money sit in an account and gather dust.

They take that money and lend it to fund their profit-making ventures. As such, when you put your money in a bank, at least part of your money will go to funding some projects that you may or may not know about.

The problem arises when banks invest in ventures that many might consider unethical or socially undesirable.

For example, many big-name banking institutions are connected to or have been connected to weapons manufacturing, exploitative practices, unfair labour conditions, environmentally unfriendly practices, and many more. For example, in 2019 alone, the world’s largest banking institutions invest more than £1.4 trillion into fossil fuel financing.

Other destructive industries that large British banking institutions have been linked to include deforestation projects, nuclear weapons, industries that use slave labour, and unethical tax haven behaviour.

So as you can see, many people have a legitimate problem with traditional banking institutions and understandably want an alternative. Big hedge funds and fossil fuel financing make banking more predatory for everyone and people want more options for banks and building societies.

7 Best Ethical Banks UK (2021)

1. Triodos Bank

Triodos Bank is often included on consumer lists as one of the most ethical banks available in the UK and one of the most sustainable banks in the world. The company has the mission to “make money work for positive social, environmental, and cultural change”.

Triodos Bank also claims that it emphasizes human dignity at its core and sets minimum standards for what companies they will invest in. 

Triodos Bank invests in diverse areas including health and safety, governance, and human rights, and excludes companies that deal in alcohol, gambling, pornography, tobacco, weapons, and other industries that involve conflict minerals and human rights abuses.

Triodos has also been recognized by the International Campaign to Abolish Nuclear Weapons for their principle of excluding all companies that work in arms-related activity. 

Triodos Bank also invests heavily in sustainable industries that have a positive environmental impact. It outlines its stance on biodiversity, deforestation, genetic engineering, hazardous substances, and contamination along with water and mining resources.

A large chunk of its money goes towards investments in environmentally-friendly energy production and agriculture projects. 

Triodos Bank is also very transparent about its activities. They publish a full list of companies they work with and give full information about their finances. Triodos is focused on putting its profits back into local communities and has so far invested over £6 billion into beneficial projects around Europe.

2. Co-op

The Co-Operative Bank was founded with co-op values and emphasises sustainability at the top of the list of their values. The Co-Operative Bank seeks to build a greener future for young people and seeks to inspire meaningful change by enacting and supporting co-operative ventures across the economy.

They are the first high-street bank that has a customer-led ethical policy that has been shaped by hundreds of thousands of customers. 

Co-op engages in several ventures meant to inspire positive social change. They heavily screen possible investments to make sure that they are not investing in any companies that conflict with their stated ethical values.

They also seek to bring consumer-friendly and fair banking products to the larger public. The key ethical areas they focus on include ethical banking, ethical products, and services, ethical workplaces and cultures, ethical campaigning, with a focus on supporting workers’ co-operatives to change the landscape of the business world. 

The Co-Operative Bank works with several organisations around the country, including organisations that tackle youth homelessness and those who are struggling to reach financial independence.

They have also worked with Amnesty International to promote a vision of equality and support of human rights. The Co-Operative Bank has also spearheaded several developments in ethical banking in England including free banking accounts in credit and consumer-led ethical policies. 

3. Starling Bank

Starling Bank (read our full review of Starling here) is another well-known UK bank that has dedicated itself to ethical practice. Starling Bank is committed to developing a business relationship with high-quality suppliers and strives to create an ethical environment in which they can function, an environment that prioritises fair treatment and customers. 

Starling Bank does not provide services or invest in companies that use their power to promote publicly harmful behaviour to yield maximum profits. As such, they exclude several businesses that deal in arms manufacturing, tobacco companies, and more.

They don’t invest in such organisations and they won’t take their money. They are transparent about how they deal with your money and provide full publications on all of their transactions and dealings.

Starling Bank is dedicated to treating customers fairly, ensuring the voice of customers is heard, and adopting a responsible approach to managing finances and providing relevant information to customers.

Starling Bank also focuses heavily on technology investments and ventures to ensure that advances in technology are shared equally across all of society. 

Starling Bank is also heavily devoted to the environment and furthers the pursuit of environmental sustainability and the goal of combating climate change. They also refuse to donate to politicians or political campaigns, to keep their funds neutral.

4.  Engage Bank

Engage Bank is a credit union that is dedicated to providing an ethical alternative to banking for consumers. Due to it being a credit union, it has a cooperative design, meaning that the accounts are controlled by members.

Co-op banks and credit unions are quickly becoming alternatives to traditional private high street banks because they offer more equitable conditions for their customers and businesses that they work with.

Engage offers banking products and their accounts are aimed at people who “prefer a more ethical approach to finance” and serves as an alternative to those who have been rejected by high street banks. 

Engage Bank is a purely digital account so they do not have a physical branch or location. With Engage, you only ever pay what you need in addition to a small monthly fee.

Engage also has junior accounts for minors under the age of 16 which has all the functionality of the adult accounts plus features that allow parents and guardians to monitor and control their children’s buying habits. 

Engage Bank is unique in that it is offered through a variety of already existing credit unions which helps both the Engage brand and the various banking cooperatives around the country. Engage does not invest your money or financially deal with controversial companies that trade in arms dealing or harmful substances such as tobacco and alcohol. 

5. Nationwide

Nationwide may not have the green credentials or ethical trappings of other ethical banks, but they are one of the oldest and most established building societies in the entire UK nation.

Nationwide is not listed on the stock market and is completely owned by its members. That means you do not see a conflict of interest between its executives and owners as they are the same people. Instead, Nationwide is 100% accountable to you and other members. Nationwide does not register on lists of fossil fuel donations and it has a great selection of consumer-level banking products like checking and banking accounts. 

Nationwide also chooses its investments based on ethical principles and does not buy into companies in countries that have bad human rights records or traffic in conflict materials that are connected with violence and human rights abuses. Nationwide also pledges to not invest in any companies that deal with weapons manufacturing or nuclear weapons. 

Nationwide is a bit interesting on this list as it is one of the few high-street banks that we included. They are run differently though than most large banks and put the members first. They also take great pains to listen to member feedback to make changes in their structures.

So, if you’re looking for an ethical bank that has a long history of ethical practices, then Nationwide is a good choice. 

6. Atom

Atom Bank is geared towards those who prefer online banking. They claim to want to change the face of banking for the good, and the better.

As such, Atom bank is based on sustainable practices that focus on developing technology that is designed to help people. They also have an extensive statement saying that they have a zero-tolerance approach to any form of modern slavery.

As such, they will not treat any business that has had a history of unfair working conditions or slave labour conditions. They also have several policies to make sure that their standards are met, including whistleblowing policies, outsourcing procurement policies, and vetting policies

Atom bank PLC also works to identify weaknesses in the supply chain and mitigate the risks of unethical activity in the supply chains of businesses they support. Atom also claims that it is an intensely human company that has personalised its bank.

They are growing quickly and are a lead partner for the STEM program delivered by the Prince’s Trust. They are also involved with several programs dedicated to further education in the UK.

7. Monzo

Monzo (read our full review of Monzo here) is a purely online app-based bank in the UK that was started to change the traditional banking landscape to give people more control over their money. Monzo is regulated by the Financial Conduct Authority and is a 100% legitimate bank.

They take great care to make sure that they invest in ethical practices, and they have identified 4 areas of focus:

  1. Accessibility
  2. Vulnerable customers,
  3. Financial inclusion
  4. Environmental concerns.

Up to 25% of Monzo’s accounts are in the form of unsecured overdrafts and loans, and they claim that every member of the Monzo team is paid a living wage, regardless of their role in the company or if they are employed by a third-party organisation.

Monzo does not sell financial products such as mortgage or credit cards but they offer ISA and savings accounts that earn interest on your money.

It has also been scored as an ethical bank by several other institutions, though they have received negative marks as they are not as transparent on their actual investment record. Monzo has an ethics page but they do not give explicit information on where their investments go.

Wrapping Up

If you want to find an ethical bank for your money, then you need an ethical bank that also offers savings accounts, customer service, and other pieces of information that are relevant to the ethical consumer.

Many banks are involved in unethical practices like fossil fuel companies, bad investment policies, and ecologically destructive practices like palm oil and tax havens policies. Organisations in the banking sector are trying to build a better way to do banking and cause positive change for issues such as climate change and other issues important to the ethical consumer and their values.

So when it comes to ethical current accounts, you need to find banks that have good business practices. Whether you need savings accounts or checking bank accounts, building societies and credit unions are your optimal choice.

About author

Fully qualified CISI Investment adviser for 5 year. Managed UK private client portfolios.
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