Ethical Banking: what customers care about

  • 30 May 2022
  • Blog | Professionalism and Ethics | Blog

When it comes to purchasing decisions, consumers are increasingly opting for ethical, value-led businesses. But this trend isn’t limited to spending power alone – ethical practices are also playing a significant role in where consumers are choosing to keep, save and invest their money. 

Over the last two decades, ethical expenditure in the UK has grown tenfold, breaking the £100bn mark in 2020. And, the ethical money sector saw a near 20% increase between 2019-20 alone.  

But with the banking market still dominated by the so-called big five, making the change to a more ethical bank could be the next step for many. 

So, what is ethical banking? And what are some of the key criteria that could persuade customers of a bank’s ESG credentials? 

Don’t invest in… 

Whether it is nuclear weapons or fossil fuels, mainstream banks are having to rethink their funding patterns of the past. Customers are becoming increasingly conscious of how banks are using their money, and these so-called ‘dirty investments’ are hugely problematic from an ethical banking standpoint. Increasingly, customers look towards businesses that make a positive social and environmental impact.  

Since the 2015 Paris Agreement, 35 of the world’s major private banks have provided the fossil fuel industry with a total of $2.7tn in funding. Financing coal-fired power stations or factory farming sits in complete opposition to the concerns of customers. Banks must take greater steps to reform their portfolios and put a stop to their continued investment in industries that have a negative impact on the environment, and on human rights. 

But do invest in… 

Simply avoiding problematic industries isn’t the whole picture, of course. Another key consideration for customers is whether a bank is helping to fund a better world. 

Customers want to see investment in industries that are supporting a transition into a fairer and more sustainable world. From clean energy, to local community projects and affordable housing, there are a number of sectors that score highly in a customer’s ethical assessment.  

Carbon footprint 

While a bank might be helping to fund climate-positive initiatives, what about the institutions’ own impact on the planet? Customers consider environmental issues to be of great importance in defining an ethical institution. When it comes to environmental factors, the semi-recent influx of app-based banks such as Monzo and Revolut definitely have a head start. And like building societies, these banks don’t currently fund bigger environmentally destructive industries, such as palm oil plantations and fossil fuels. However a commitment to reducing the institution’s carbon impact is vital, and only Triodos is rated successfully in this area.  


Transparency is also crucial when it comes to ethical banking. Customers consider how an institution reports on its own carbon impact, fair treatment of its employees, and it’s investment record. This is also significant when considering the likely use of tax avoidance strategies by a number of bigger banking groups. 

Clarity and accessibility are a positive for customers, and this applies to any ethical policies a bank develops. Publishing a clear set of ethically focused principles allows customers to better understand the bank’s ethical values.  

Transparency also covers financial legislation and lobbying practices. Examples such as Citigroup’s $4.5m spend on lobbying during the US 2020 election cycle, demonstrate the power of mainstream banking groups. But political lobbying, or fighting legislative reform aimed at closing loopholes and improving transparency, counts against banks when customers are assessing their ethical credentials.  

Customers care about ethical practices, as does The Chartered Banker. Our mission is to enhance socially purposeful, responsible banking. Considering credentials based upon environmental impact, positive investments, transparency, and values, the bigger mainstream banks are taking steps in the right direction. But there still seems to some way to go.