Banking
Charities of all sizes can consider social, environmental and ethical (SEE) issues when choosing which institution to bank with. High street banks, building societies and mission-related financial institutions provide options for current and savings accounts as well as credit facilities.
In this section:
Responsible Investment issues
Types of institutions
How Responsible Investment operates
Examples
Further information
Responsible Investment issues
The issues you may wish to consider include:
1. the types of businesses the bank would and would not offer services to
2. what the bank is willing to invest in
3. the bank’s business practices.
Your charity may therefore wish to consider whether the money that you deposit in a bank or building society could be being used to support activities that conflict with your mission, as well as how the institution operates.
A responsible approach to banking revolves around the decision on which institution(s) to bank with.
Types of institutions
Many high street banks are listed on Stock Exchanges and so have external shareholders to consider and pay dividends to. This distinguishes them from other types of institution which distribute profits to members or in line with a social or environmental mission. An exception is the Co-operative Bank, which is not listed but part of Co-operative Financial Services Ltd.
Building societies tend to concentrate on providing mortgages and personal finance services, though some offer charity accounts. They are “mutuals” which means they are owned by their members – their savers and borrowers – instead of having external shareholders.
"Mission-based" financial organisations provide a focused range of financial services linked to certain social and environmental objectives.
Other banking options include internet banks and supermarkets, though these services tend to be owned or operated in connection with high street banks. For example, Smile is part of Co-operative Financial Services.
How Responsible Investment operates
Your charity can compare different banks’ attitudes towards corporate social responsibility (CSR) and their policies on SEE issues. Banks are increasingly producing CSR reports and signing up to international agreements such as the Equator Principles, voluntary codes such as FORGE, which promote responsible behaviour in the banking sector, and initiatives such as UNEPFI which works to promote best environmental and sustainability practice within financial institutions.
Your charity may wish to consider the SEE issues of most relevance to the banking sector which may be included in a bank’s ethical policy (if it has one). These include:
- lending to the arms trade
- human rights and lending to oppressive regimes
- environmental issues
- charitable giving and support for the community
- social and financial exclusion
- Third World debt
- equal opportunities/diversity
It is less likely that a Building Society will have exposure to some of the issues above such as the arms trade and third world debt due to their business being more with individuals and not large corporations or governments.
Examples
A selection of banking examples are given below:
CAF Bank - a not for profit bank which offers interest-bearing current and deposit accounts specifically to charities, not for profit organisations, social enterprises and charitable trading subsidiaries.
Charity Bank - a bank and registered charity which provides loan finance to charities, not for profit organisations and social enterprises. It also offers a range of deposit accounts.
Co-operative Bank – a high street bank with an ethical policy governing the types of businesses the bank would or would not offer services to.
Ecology Building Society - a building society which offers a charity deposit account and uses deposits to grant mortgages on properties and projects that help the environment.
Triodos Bank – a mission-based institution which only lends to organisations that create social, environmental and cultural value such as charities, social businesses, community projects and environmental initiatives.
Further information
EIRIS Guide to Responsible Banking 2003
This guide reviews the performance of the main UK high street banks in relation to key SEE issues.
Equator Principles
A global initiative, the ‘Equator Principles’ is a framework for how banks can manage environmental and social issues in project financing.
FORGE
Some of the larger banks are signed up to a UK initiative backed by the Department of Trade and Industry and the British Bankers Association; the Forge Group. They work on Corporate Social Responsibility guidance for the financial services sector.
United Nations Environment Programme Finance Initiative (UNEP FI)
The UNEP FI is a partnership between the United Nations Environment Programme (UNEP) and the private financial sector. Through regional activities, a comprehensive work programme, training programmes and research, UNEP FI carries out its mission to identify, promote, and realise the adoption of best environmental and sustainability practice at all levels of financial institution operations.
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