Have you ever wondered, how much of your money is being used to fund destruction of rainforest, arms trade or ocean pollution? Before you jump and shout: no way I am funding destruction of Amazon rainforest from my money, it may be worth checking which bank you bank with or where your pension savings are invested. There may be quite a few nasty surprises for you out there. Why your bank may be a problem?
Profundo, a Dutch company specialising in researching supply chains, financial sector, policy developments and assessing their impact on sustainability, has found that UK was the biggest source of financing for the six of the major agribusinesses mostly implicated in destruction of climate-critical rainforests. For example, Marfrig Global Foods, one of the world’s leading beef producers who was found to buy cattle from indirect suppliers deforesting the Amazon, received financial support from Santander worth over $1 billion. And that just one example. Quite a few of the well-known UK high street banks are financing companies linked to extensive deforestation, industrial cattle farming and production of harmful pesticides. It is highly likely your bank may be using your savings to provide loans to companies with questionable ethical and environmental practices.
It is not all just about banking. Many of us who are employed or self-employed make monthly contributions to their future pension pot via a pension scheme. This money is then invested in stock exchange market (and other assets) and if you have not consciously selected an ethical fund, it is almost certain you are financing fossil fuel extraction, plastic production or other environmentally or socially detrimental projects.
So, what can you do?
First, if you have a pension fund, check where your money is being invested. Many providers offer ethical funds or funds which take environmental, social and governance factors into consideration before they invest in any company. Look out for terms such as ESG (Environmental, Social, Governance), SRI (Socially Responsible Investment), ethical, sustainable or impact investing in the names of the funds you are putting your money into. And if you are concerned about performance of such funds, don’t worry. Research shows that “funds that use ESG criteria or pursue sustainability themes perform well compared with their Morningstar Category peers on a risk-adjusted basis”. Actually, during the resent pandemic, ESG funds outperformed the more generic funds.
There is also a growing number of banks built on ethical principles. One of them is a Dutch bank established in 1980 called Triodos.* They offer current accounts, saving accounts as well as other banking services to individual, businesses and charities. The bank’s mission is to help create a better world by financing only companies that focus on people, the environment and culture. They are fully transparent and you can check on their website how your money is being used. From helping one of the first organic bakeries in London through sustainable architects’ practice to renewable energy companies, the customers’ money is being put to a good use. The bank is covered by the Financial Services Compensation Scheme as any other UK bank and as such your money is protected.
Triodos is not the only ethical bank operating in the UK. The good shopping guide provides a quick ranking of the most ethical banks so there are quite a few to choose from whether you need a current account, business loan or a mortgage.
Even if you do not have vast amounts of money, even if you are using a bank just for carrying out day to day transactions, who you bank with can make a difference. If your heart is set on protecting the environment and building a fairer society, you may as well put your money where your heart is.
* We are not associated with Triodos or in any way connected with the company, its subsidiaries or employees. The content of this article is not an endorsement of their products but serves only as an example of an ethical bank. Please do your own research before using any of the products or services mentioned.
This blog is an expression of our personal opinion. It does not constitute a financial advice and nothing written in this article should be constructed as financial advice. It is not intendent to be relied upon by users in making (or refraining from making) any investment or financial decision. Appropriate independent advice should be obtained before making any such decision.