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Ethical banking

windowI changed my bank today. Why? Well, I bank with HSBC one of the UK’s big four banks. The others are Lloyds TSB, Barclays and Royal Bank Of Scotland/Nat West. Two-thirds of people in the UK bank with one of them. And none of these banks has an ethical investment policy.

Why does this matter? Because it means that you don’t know that they’re not investing money into something that you wouldn’t.

The big four

Ethically speaking, none of them appear to have a particularly good track record. In recent years they have received criticism for funding deforestation by investing in business illegally logging in Indonesia. They’ve also been accused of investing in businesses that export arms to oppressive regimes and business that extract natural materials in environmentally unsound ways. I don’t want to be complicit in any of these things and I doubt you do either.

Just recently HSBC, RBS and Barclays been in the press because they are investing into the new controversial coal-fire powerstation at Kingsnorth with my bank, HSBC investing £10 billion.

Currency speculation

Apart from what your bank invests in, the other big problem is currency speculation. Everyday a lot of money is gambled on currency markets. It’s estimated that between £1 trillion and £2 trillion in currency is traded everyday. I’m not even sure how much a trillion is, but it sounds like more than I can possibly imagine.

Most of this trading is banks and investment funds hoping to make money from short-term changes in exchange rates. The problem is that when lots of people buy or sell a particular currency, it can seriously destabilise that country’s economy – especially if it’s a developing country. This can lead to problems like collapsed banks and devalued currency.

Many people are campaigning for ways to curb this practice including taxing transactions. But as yet currency speculation continues.

So who did I change my bank to?

I switched to Smile, the internet bank owned by The Co-operative Bank.

The Co-op is the only UK bank to have an ethical investment policy, something they have had since 1992. The policy is helped determined by the bank’s customers. In 2005 they claim to have turned away £10 million worth of business that conflicts with their customers concerns.

Some of the things the policy says they won’t invest in:
•    Governments or businesses that fail to uphold basic human rights
•    Businesses selling arms to oppressive regimes or selling torture equipment
•    Genetically modified food
•    Intensive farming like battery eggs
•    The extraction or production of fossil fuels
•    Unsustainable harvesting of natural resources including timber and fish
•    Manufacture of chemicals that are linked to long-term health concerns

They also don’t support currency speculation.

I find it deeply troubling that a bank that I have used for twenty years may have been investing my money in any of the above. I’m not saying they necessarily have but the fact they don’t categorically say they haven’t, is worrying. And it’s because they don’t have such a policy that says they don’t do any of these things that I have decided to switch.

Co-op’s policy also includes good things they actively look to invest in.

Things like:
•    Fair trade businesses
•    Charities and social enterprise businesses
•    Renewable energy
•    Recycling and sustainable waste management
•    Sustainable natural products and organic produce

So not only do I know that my money isn’t supporting anything dodgy, I know that it is quite possibly being invested in things that can make the world a better place. Which is nice.

Other benefits

And not only is it ethical, their current account performs pretty well too. My HSBC account offered me a slightly insulting 0.1% interest (AER). With Smile I get 2.27% – pretty good for a current account. They also only charge me 15.9% interest (EAR) on the overdraft compared to HSBC’s 18.8%. They also rate very highly (and higher than HSBC) in customer satisfaction surveys.

And if you switch, they sort out all the faff of moving direct debits and so on. So far, it seems quite painless.

So if you’re with one of the big four and you’d like your money to be doing something useful and more importantly not being invested in anything untoward, then have a look a Smile. It’s called Smile too, which makes me do just that.

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