In recent years, civil society has become increasingly concerned by the role that commercial bank lending is playing in the nature and climate breakdown unfolding around us. Because of this, groups have begun calling for ordinary people to help drive change by factoring in the ethical performance of banks when choosing a bank account.
In 2023, we were asked help to produce an ethical ranking of ten banks for UK universities. This can be used to accompany resources for students, staff, and students and visiting scholars from overseas. The ten banks were chosen to include the five biggest high street brands and a range of more ethical options.
Each bank was assessed against the ten ethical categories outlined below. If it did well in, for example, six categories it would get a score of six.
| Bank | Ethical score out of 10 |
|---|---|
| Triodos | 8.5 |
| Nationwide | 8 |
| Co-operative | 7 |
| Monzo | 6 |
| Al Rayan | 3 |
| Lloyds | 1.5 |
| Natwest | 1 |
| Santander | 1 |
| Barclays | 0.5 |
| HSBC | 0 |
Ethical Consumer's own published bank rankings use 20 criteria. The ranking for UK universities uses the same methodology but includes just ten of them.
To do well, companies needed to report on their 'financed emissions' and to have a credible plan for reducing them quickly enough. They could not score well if they had ongoing financial relationships with, or links to, oil, gas and coal companies, or if they had been criticised in civil society groups’ research reports such as the Rainforest Action Network's Banking on Climate Chaos 2023 report.
For companies to do well they needed to discuss in a credible way, and report on, what they were doing to mitigate other likely impacts of lending decisions on areas like biodiversity and deforestation.
As well as searching for civil society criticisms, the research looked to see if banks were transparent about who they were lending to and whether they avoided sectors with high pollution and toxic emissions.
Civil society groups have recently begun to link UK banks to commodity chains driving deforestation. These include Amazon Watch's “Complicity In Destruction II: How Northern Consumers and Financiers Enable Bolsonaro's Assault On The Brazilian Amazon”, and the Global Witness “Rubbed Out” report on rubber plantations.
Similar reports have raised issues around human rights abuses linked to UK bank lending. For example, BankTrack have released a report criticising bank relationships with companies linked to the Myanmar military government, and Amazon Watch have a report entitled “Complicity In Destruction IV: How Mining Companies and International Investors Drive Indigenous Rights Violations and Threaten the Future of the Amazon”.
We deducted marks in this category where reliable news reports were found detailing banks’ mistreatment of their staff. Banks also lost marks if they were named as financers of the hospitality and construction sector in Qatar in the report "No questions asked: Profiting from the construction and hotel boom in Qatar".
For many years the Switzerland-based International Campaign to Abolish Nuclear Weapons (ICAN) has released an annual report called "Don't Bank on the Bomb". Its December 2022 report was called "Risky Returns - Nuclear weapon producers and their financiers”. All of the big five UK banks are identified in this report as financing nuclear weapons manufacture.
Companies mainly lost marks in this category for excessive directors' pay, for mis-selling of financial products to consumers and even, in a few cases, for being fined by western governments for not having proper money laundering controls.
Ethical Consumer have long rated companies for their likely use of tax avoidance strategies because they believe that corporation tax plays an important role in creating socially just societies. The research mainly looks to see whether the company has subsidiaries in tax havens like the Cayman Islands and, if it does, whether it has a convincing explanation in the public domain of how its presence there is not linked to tax avoidance.
Because of the problems that profit-seeking corporations have created in this area, this category seeks to give additional marks to companies that are structured in some kind of not-solely-for-profit way. Only Triodos and Nationwide gained these marks in this research.
How to take actionIf you decide to factor ethical performance into your choice of bank account, it is helpful to let the banks know. Twitter, or other social media platforms, are a great way of doing this if you use them. |
Detailed explanations behind each ranking decision are available under the appropriate category headings for logged-in subscribers reading the Ethical Consumer banking guide. The guide includes rankings for 21 other banking brands offering UK current accounts.
Our consumer website also includes articles discussing ethics in financial services generally and guides to other products including insurance and savings accounts.
These rankings, like all those of Ethical Consumer, score company groups which include any entity with a holding of more than 25%. It does not take into account ethical conduct at outsourced financial product offerings.
The research was conducted in June 2023.