Banks often use the money you deposit in your savings account to lend to others, especially to corporations and industries. Sometimes, these corporations may indulge in activities that aren’t great for people or the planet, and they may not align with your individual value system.
Many Australians are choosing to lead a more ethical life, right from recycling to using public transport and donating to noble causes. This trend continues to show its prominence even in the banking sector as you can now indirectly support and promote environmental sustainability and other causes that matter to you by choosing banks that offer ethical savings accounts.
What is an ethical savings account?
While the term ‘ethical banking’ might be vague, it is generally used to describe a financial institution or system that operates based on values driven by environmental and social responsibility.
By opting for an ethical savings account, your bank ensures that your money isn’t invested in any company that engages in activities that are harmful to the environment or society.
Ethical banking can rely on negative screening or positive screening. Negative screening entails avoiding investing in companies that cause harm to the planet or people, while positive screening is actively investing in companies that do good for the planet or people.
In general, ethical banks do not invest, trade-in, or have exposure to companies that engage in any of the following:
- Mining of precious minerals and other materials like coal or fossil fuels
- Weapons manufacturing or trading
- Tobacco manufacturing or trading
- Deforestation
- Human exploitation or abusing human rights
- Gambling
- Pornography or sex slave trade
- Cruelty towards animals
What are the different types of ethical causes you can support?
Some banks choose to support specific causes when it comes to ethical banking. So, if you want to invest or promote a cause that you are passionate about, you can choose a bank that is actively supporting that cause as well. Some of the most common ethical causes that banks support are:
- Protecting the environment: Banks that focus on environmental issues will conduct thorough research on customers and business partners to ensure they are not participating in any activities that are causing damage to the planet.
- Protecting animal rights: Some ethical savings accounts may support institutions that protect and preserve wild and domestic animals from abuse.
- Protecting the community: Banks can choose to invest in local businesses and causes that directly affect the community.
How can you switch to ethical banking?
If you want to switch to ethical banking, you need first to determine if your current bank is ethical or not. While you can ask your bank for information about where they invest money, you may also want to research and ensure that the bank isn’t supporting companies that are indulging in harmful activities.
If your current bank isn’t ethical, it’s time to find one that is. You can assess a range of ethical banks and financial institutions, and once you find the right one, move your account to that bank.
While browsing through your options for choosing the best ethical savings account, you may want to consider:
- What are the values and ethical guidelines the bank follows?
- What are the current investments the bank makes and who are the partners?
- What is the quality of the products the bank offers, including competitive interest rates, product features, etc.?
- Does the bank have a branch in your town or city and offers a comprehensive online platform? This will enable you to support the environment while carrying out your banking activities with convenience.
