What makes an ethical bank?

Photo by: Priscilla Du Preez on Unsplash.
Wind turbines on a green field.

Are you looking for a home loan but struggling to find a bank you can trust? Or are you interested in borrowing ethically but not sure where to start? Are you wondering how you can make your money work for you and the things you care about? And what is this hype about ethical bank?

Why use an ethical bank?

Engaging in services from an ethical bank has never been more important. With many banks continuing to fund fossil fuel and other harmful industries and distrust in the financial sector at all-time lows. Hence, finding a bank you can trust can be a challenge. Taking out a home loan is often the biggest financial commitment you’ll make in your life. So, it’s no wonder you’re nervous about where your money is going.

It’s never been more important to bank ethically. However, finding lenders that are committed to the ethical treatment of their customers, staff, community and planet is easier said than done. You may even be wondering if an ethical bank even exists. That’s why we’ve been researching and reviewing a range of banks to determine who the most ethical lenders are.

But why trust us? What makes us qualified to review banks? And why do we care?

In this article, we’ll explain the three pieces of criteria we use when reviewing a bank. We focus on three main categories: environmental impact, staff impact and community impact. We’ll also provide links to our existing bank reviews so you can see how we put our method into practice. Finally, we’ll explain how and why your loan matters. Where you put your money is important, not only for you, but for our community and our planet:

  • Environmental impact
  • Staff impact
  • Community impact
  • Do no harm vs do good
  • Our bank reviews
  • Why your loan matters

Environmental Impact

One important piece of criteria for us to consider when we’re reviewing a bank is their environmental impact. Do they fund fossil fuels or other industries that harm the environment? If they do, or have done in the past, have they shown they’re committed to more sustainable investments now and in the future?

Although many banks are continuing to fund fossil fuel industries and other practices that are harmful to the environment, some are taking a new approach. Bank Australia, for example, refuses to fund fossil fuels. It has even created a Clean Home Loan for customers with sustainable homes and building plans.

Other banks, although having funded fossil fuels in the past, have now committed to stop this funding and invest in more sustainable projects. Suncorp Bank recently banned all future funding and insuring of fossil fuels, planning to phase out existing agreements by 2025 and direct investing by 2040.

It’s also important to consider whether a bank’s own business practices are environmentally friendly. Beyond Bank, for example, has created a committee dedicated to reducing their carbon footprint and establishing paperless offices. They’ve also established a green loan to reward customers with a conscience.

Staff Impact

Another key point to consider is the way a bank treats their staff. Do they pay their staff fairly? Do they actively take care of their employees? And if workplace culture has been an issue in the past, have they implemented changes to create a more positive work environment?

A business’ treatment of their staff is often a good indicator of how they’ll treat their customers. While the financial sector does not have a good track record of fair treatment, some banks are beginning to change.

Beyond Bank, for example, provides their staff with two paid days to volunteer in their community each year, an excellent opportunity for staff to take some time to engage with their community in a rewarding way.

Community Impact

The final point to consider is a bank’s impact on the community. How do they treat not just their customers, but the communities they work in? Do they support community-based initiatives and initiatives that better those communities? Do they just provide funding or do they actively involve themselves in their world?

We believe that banks should always put their customer’s interests first. And that doesn’t just involve looking after their money. Banks should be invested in what their customers are invested in, support what their customers support and strive to fund the people, groups and causes that do good. For example, ME Bank has raised funds for breast cancer research and supported the HESTA awards, which recognised heroes in the healthcare sector; real people making a real difference.

It’s also important to note the banks who not only have a positive financial impact in their communities, but a human impact too. Many of the staff at Beyond Bank use their paid volunteering days to participate in bush rejuvenation programs. This active participation in supporting the community and the environment demonstrates a sense of compassion that translates into their work with customers.

Do no harm vs do good

We also judge banks by considering whether they do no harm or do good. A bank that does no harm might avoid funding fossil fuels or avoid participating in schemes that harm their customers. These are positive steps, but ultimately, they’re just steps. Not doing harm should not be the end goal of an ethical bank.

Instead, banks should be focused on doing good. What we define as doing good is taking positive, deliberate steps out of their way to support their community, staff and customers. This simple concept of striving to actively do good rather than avoid doing harm transforms banking into an ethical practice in which we see people come before profits.

Our bank reviews

Now that you know how and why we review banks, you can explore some of our in-depth reviews of different lenders:

If any of these lenders have interested you or you want to find out more about them and the concept of ethical banking, we can help you get in touch. Contact one of our experienced brokers via our website or continue to explore our articles.

Your loan matters

You may think that as you’re just one person and therefore your home loan couldn’t make that much difference to the community and the planet. But banks make huge amounts of profit from home loans, so who you decide to bank with is an important decision, not just for you, but for our community and planet.

Although banking ethically is incredibly rewarding, it’s easier said than done. Navigating the complex financial sector and finding a home loan that not only works for you, but works for the planet, can be very challenging on your own.

By working with BFG, you can relax knowing we’ll find a good deal for you and the planet. We research and compare loans from more than 30 lenders and handle all the communication with these lenders so you don’t have to. We can use our knowledge and existing relationships with lenders to find the best home loan for your situation and negotiate better deals to save you time and money.

And best of all? We do it for free.

If you’re ready to put the planet over profits, get in touch with one of our experienced brokers via our website for an obligation-free chat at any time.  

Disclaimer: The information presented in this article is general in nature and does not constitute financial advice. Before making any decisions or changes regarding a product or service, please speak to a professional for information and guidance relevant to your personal financial situation.