A Guide to Ethical Banking

Exploring ethical banking is an excellent way to ensure your business practices align with your values, especially concerning environmental and social responsibility. Surprisingly, switching to an ethical business bank account is one of the easiest steps your company can take to significantly reduce its environmental impact. 

For a quick check of the extent to which your current bank is investing in projects that contribute to the climate crisis, see bank.green.

What to Look Out for in an Ethical Bank:

Seek out banks that demonstrate a strong commitment to positive societal and environmental impacts. These institutions set themselves apart by financing only those companies and other investments that adhere to stringent ethical criteria. For banks primarily offering retail banking services, this approach is crucial in ensuring their operations contribute beneficially to society and the environment.

Ethical Banks to Consider:

If you were thinking about switching, see the Ethical Consumer guide to ethical business bank accounts, which highlights:

  1. Triodos Bank: Renowned for its dedication to positive environmental and social impacts. Listed as the strongest option, but they are currently not accepting new business customers.
  2. Co-operative Bank: offers a strong and robust ethical policy.
  3. Cumberland Building Society: the only major building society to offer business accounts and only lends for mortgage purposes, i.e. they do not invest more widely so the risk of significant environmentally damaging impacts is minimal.
  4. Starling Bank: is the one that most clients switch to because of the quality of their tech platform and service. They have made strong commitments on avoiding investment in certain industries such as fossil fuels and arms manufacture although its environmental reporting and transparency commitment is not comprehensive.

Making the Switch with the Switch Guarantee Service

If your business or organisation has less than 50 employees and an annual turnover of less than £6.5m, the transition to an ethical bank can be seamless and stress-free, thanks to the Switch Guarantee service. This service ensures the switching process is handled for you, at no cost. Notably, banks such as Triodos Bank, Starling Bank, The Co-operative Bank plc, and Cumberland Building Society, participate in this scheme. Not only is much of the switching process managed on your behalf, but any losses incurred during the switch are covered by the guarantee.

Steps to Switching Your Business Bank Account:

1. Open an Account: Select and open an account with your chosen ethical bank.

2. Set a Switch Date: Decide on the date for the switch to occur.

3. Update Details: Modify your invoice template and Terms and Conditions with the new bank details.

4. Inform Your Staff: Notify your team about the change in wage payments.

5. Notify Customers: Communicate your new banking details to regular customers.

6. Transfer Funds: Use the Switch Guarantee service to move your funds to the new account, if eligible.

7. Update Payments: Transfer regular payments to the new account, also facilitated by the service.

8. Adjust Payment Systems: Update settings on platforms like Stripe or GoCardless.

9. Integrate Bookkeeping: Set up the new bank feed on systems such as Xero.

Considering Long-Term Actions and Alternatives:

If an immediate switch isn’t possible, consider it as a future objective. Meanwhile, you might move any reserves to a climate-friendly bank as an intermediate step.

The Bottom Line:

Switching to an ethical business bank account is an effective way to ensure your company’s finances reflect its commitment to sustainability and ethical practices. It’s a move that not only aligns with your values but also contributes to a larger movement towards responsible and climate-conscious finance. Sharing your journey can inspire others and amplify the impact of ethical banking choices.