Who are the Most Ethical Banks in the UK 2021? (Plus the ones to avoid!)

most ethical bank in the uk 2021

Who you bank with is a powerful way to support a more sustainable world. 

Ethical banks offer a brighter future, have greener investment policies and pay their fair share of tax. The vast majority are also protected by the Financial Services Compensation Scheme (FSCS), meaning your money is just as safe in an ethical bank as it is in any other FSCS protected bank. 

The banking sector hasn’t been short of controversy in the last few years, and they aren’t known for their world caring policies either. But ethical banking alternatives in the UK do exist and are out there to switch to now.

Only a handful of banks in the UK can claim to be ethical. Let’s take a look at both high street banks and app-based newcomers that offer a more sustainable current account.

Is your bank ethical?

Asking yourself ‘is my bank ethical?’ is an important question.

All banks use your money, and everyone else’s money deposited in them, to invest in other companies and projects. You don’t get consulted about this, which is why you need to take a bigger view on how the company operates.

Having a current account with one of the ‘big four’ traditional banks really is a vote for the status quo. Is this a bad thing?

The status quo in the traditional banking world means funding the fossil fuel industry, new oil and gas exploration, investing in nuclear weapons, tax avoidance, profiteering from the arms trade, excessive pay for the top dogs and big gaps in pay between men and women.

The latest Banking on Climate Chaos 2021 report finds that Barclays and HSBC are two of the worst fossil fuel financiers in Europe. Since the 2016 Paris Climate Change Agreement, big banks across the world have provided – brace yourself – $3.8 trillion (yes, trillion) to fossil fuel companies.

Two of the worst UK culprits are Barclays, who have provided $145 billion worth of fossil fuel funding, and HSBC who have financed $115 billion.

In my view, and in the view of many others, this isn’t the sustainable world we want to see in the future. It’s also why many people are making the current account switch to an ethical bank. Without regular money from the masses, the financial power of a bank starts to diminish.

What can you do about it?

The great news is that switching current account in 2021 couldn’t be any easier thanks to the Current Account Switch Service (CASS).

Just like changing your electricity provider, which I did with Bulb Energy, switching bank account can be done at the click of a button, stress-free in about 5 minutes. Your new bank will then take care of everything else, switch all your payments across and have you up and running in a week.

In 2021, I switched my current account using the CASS from Natwest, who I’d been with since a teenager. I’d put off switching as I thought it would be too complex, but the process has been genuinely simple. I wish I’d done it sooner.

More on easy switching at the end.

What is an ethical bank and what makes them different?

Running your current account with an ethical bank allows you to fully manage your own finances, whilst not supporting environmental damaging activities and world damaging industries.

According to Ethical Consumer, there are two major areas to look at when considering an ethical bank:

  • Investments – How does the bank invest its money?
  • Tax – Does it pay its fair share of tax?

It’s difficult to put a finger on exactly what an ethical bank does, it’s more what they don’t do which makes them a more ethical alternative.

For example, a truly ethical bank won’t invest in the fossil fuel industry or in projects that are bad for the environment. Some of the worst banks in terms of ethics are still investing billions and billions of pounds into the fossil fuel industry, piling money into some of the worst environmental practices such as deep-sea drilling and tar sands.

An ethical bank won’t finance weapon deals. Some of the most unethical banks (all listed below) are funding arms trades for countries that are linked to human rights abuses.

A bank with a conscious won’t be set up in a tax haven country. Many of the traditional banks have complicated structures and subsidiaries set up in tax havens such as the Cayman Islands, Bermuda, Jersey, Mauritius, Bahamas and a few others.

What are the most ethical banks in the UK?

If you’re interested in opening a more ethical bank account, here’s the list you need to look at. All of the banks below are protected by the FSCS

The banks listed below can certainly claim to ethical and much more environmentally conscious. Just to state, I am not a banking expert nor am I affiliate to any of the banks below.

I have conducted my own research as well as looking at the research on the Ethical Consumer and Bank Track websites. Websites such as Ethical Consumer conduct detailed research on companies and weigh up how they perform in a variety of categories, including environmental, political involvement, record on workers and human rights and product sustainability.

1.    Triodos Bank

Triodos was granted a UK banking license in 2019 and is by far the most ethical bank available in the UK.

Unlike most of the banking world, they believe they can help create a more positive society and benefit the environment.

They back up their words with actions too. Triodos are a Certified B Corp and only finance companies that focus on people, the environment or culture. They are fully transparent and publish details of each investment on their website. So far they have loaned £8.2 billion into projects across Europe to benefit people and the planet.

Triodos Bank was founded in the Netherlands in 1980, aiming to buck the trend of the banking industry. And it seems like they are doing just that.

Their current account has a fee of £3 a month, which I think this is very fair. The contactless Mastercard is made from renewable plant-based materials, such as corn and leaves, making it fully recyclable when it’s expired.

Take a look at the Triodos Bank website here

2.    Nationwide

Nationwide are a well-known high street bank, who also happen to be one of the most ethical.

They were initially founded in 1848 and the current version of Nationwide is a result of over hundred mergers across the UK.

Nationwide Building Society, to give its full name, is a financial institution that isn’t listed on the stock market and operates as a mutual. This means it is accountable to its members and run for their benefits, rather than shareholders.

They offer a range of current accounts, from free to FlexPlus with a £13 monthly fee, but with a few perks. They also have a good app to manage them.

Have a look at Nationwide here

3.    Monzo Bank

Monzo is one of the disrupter, digital banks that came onto the scene in 2016.

They’ve grown rapidly since and become a fully-fledged, authorised FSCS bank with more than 5 million customers.

Monzo shouts more about its transparency and social impact rather than its environmental ethics. With no physical branches, their environmental footprint is low compared to other banks and they use the carbon neutral AWS servers.

Some of their so-called transparency on things such as investments and environmental reporting is still murky and needs improvement, but they are a good choice for a more ethical current account. You can take a closer look on whether Monzo is an ethical bank here.

Although their ethics are different from those of Triodos, who actively want to create a more positive society, Monzo are a different type of bank and have the potential to do good. I hope they can push on the improve their ethical stance even further.

Take a look at the Monzo Bank site here

monzo bank wallet
Read more on whether Monzo is an ethical bank

4.    Starling Bank

Starling are another one of the popular app-based banks founded in 2014. They are an independent, privately owned company who started life catering for business accounts but now offer personal current accounts too. They have over 2 million customers.

Being a branchless bank but with offices in London, Southampton, Cardiff and Dublin, their carbon footprint is fairly low, particularly as they are paperless and run on renewable energy. Like Monzo, they also use the AWS servers in Dublin, which are said to be carbon neutral.

In their ethics statement, they say that they do not provide services to organisations who promote harmful behaviours, such as arms manufacturers and tobacco companies. Starling lend to UK-based individuals and small businesses, and specifically state they don’t lend to companies involved in the extraction of fossil fuels. You can read my more detailed blog on how ethical Starling Bank are.

They have recently stated that new and replacement debit cards will be made from 75% recycled PVC plastic and have pledged to become a NetZero company.

Visit the Starling Bank website here

Is Co-Op an ethical bank?

You might be expecting to see the Co-Op Bank on the ethical list. Unfortunately their score has taken a hit in recent years.

Although the Co-Op Bank is a decent choice amongst the high street providers, has a good ethical policy and stays away from fossil fuels, it is now 100% owned by a collection of US hedge funds.

These hedge fund owners, which include Invesco, Silver Point and Anchorage Capital Group, have some very shady dealings indeed. They are involved in areas such as nuclear weapons investment, palm oil plantations, political lobbying, factory farming and companies with bad animal rights records.

The four current account providers in the list above are the only FSCS protected UK banks that can claim to be ethical.

Of the rest, Metro Bank are not a bad option with a middle of the road ethical rating, but all other main high street providers come in with a poor ethics score.

Which are the worst ethical banks in the UK?

Unfortunately, the list of unethical banks is a lot longer than the ethical list.

Not only are some of these banks still heavily funding the fossil fuel industry (e.g. Barclays are the biggest fossil fuel funder in Europe and 7th globally), but they’ve also been involved in laundering money for drug cartels (HSBC), the financial crisis (RBS), trying to expose whistleblowers (Barclays) and the rigging of bank rates and fraud (Barclays).

All of the banks listed below score very poorly in terms of ethics and environmental action. In fact, most our downright funding climate breakdown. Every pound of money taken out of these unethical banks is a step in the right direction to sustainability.

  • Barclays
  • HSBC – including First Direct (HSBC brand) and M&S Money (50% HSBC)
  • NatWest Group – including NatWest, RBS, Coutts
  • Lloyds Banking Group – including Lloyds, Halifax, Bank of Scotland)
  • Santander – including Carter Allen
  • Tesco
  • Citigroup

Is switching to a green bank difficult?

No, switching to a greener bank isn’t difficult.

For many, the thought of switching bank account sounds worse than it actually is. Transferring direct debits, updating standing orders, changing the mortgage, letting your work know your new bank details etc. No thank you, I’ll stick it out with my old bank (even if they are funding climate change and financing weapons deals!)

Fantastic news – this is an outdated view as I found early this year when switching away from Natwest.

Switching your current account to a new bank is now a stress-free, simple process. This is mainly thanks to the Current Account Switch Service (CASS). 

With over 40 banks signed up to the service, CASS covers 99% of UK current accounts. You can check if your new bank is signed up here.

Once you’ve opened a new current account, you’ll probably be asked or there will be an option to switch your current account. Once you confirm you want to switch, that’s more or less your work done as your bank will take care of everything else. 

Switching current account won’t affect your credit rating, any payments to your old account will be redirected and you can choose a switch date to suit you. The current account switch will be complete within 7 working days. Visit the CASS website here for more details.

So, don’t let the thought of switching put you off because it’s much easier than you probably thought, and make the switch to an ethical bank.

If you liked that, read more on ethical money below…