Ethical banking is a vague term but really it encompasses financial institutions that operate based on the values of social and enviromental responsibility. Ethical is a very subjective term. What may be ethical to you may not sit well with me and vice-versa. However, there are four main categories that define whther a bank is considered an ethical option or not.
4 Main Categories to Determine Ethical Banking
- Whether they screen against investing in companies that do harm to the planet or to people. For example, companies that invest in fossil fuels, deforestation, gambling, child labour and etc.
- Choosing to invest in and support businesses that do good for the planet. For example, renewable energy, affordable housing, non-for-profit businesses and etc.
- Being consistent with their internal and external ethics. This means that they walk the walk and not just talk the talk. Basically meaning that the bank practices what it preaches. So if they are not willing to invest in a company that is involved with deforestation, the bank themselves should be working toawards having a paperless enviroment.
- Getting involved in the community. This would be supporting scholarships, research grants or community events.
Supporting the enviroment is really good. Having said that, there is often a misconception that there is a trade off. This is not true in reality. We tend to find that the ethical banks that we do have in our panel of lenders, tend t sit on the top 10. This is in terms of competitive interest rates and lowesrt fees.
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