When assessing the impact of your business on the environment and community in which you operate, it is common practice to assess all the inputs to your business. But how many of us would add ethical and environmental factors to our decision making process in selecting our bankers?
We’ve all heard and experienced the challenges in securing credit at a fair price in the last few years, so the ethical and environmental factors have fallen down our list of priorities.
Key factors when choosing a banking supplier:
- Ability to obtain credit.
- Cost – overdraft and transaction charges.
- Access – ability to speak to a person face to face, user friendly internet banking etc.
- Customer service.
- Reputation – are they too big to fail??
- Ethical policies – who do they do business with? Do they practice responsible lending, for example avoiding arms dealers, and supporting communities in which they work.
- Environmental policies, including carbon reduction commitments, reducing waste, and vetting their supply chains.
To select my bankers I thought I’d start with the ethical and environmental criteria, and then see what they could offer me.
A good place to start is with organisations which provide a comparison service. www.yourethicalmoney.org has a general listing rating banks across a variety of factors. From here you can perform your own research, and Your Ethical Money has some guidance on how to do this. Most, if not all, banks follow guidance on Corporate Social Reporting, which includes details of their impact on local and global communities and the environment. They publish details of their CSR agenda in their annual reports and on their websites.
After a bit of searching, I identified a few banks to consider. Here’s my journey:
High Street Banks
Like many others I’ve held my personal bank accounts with a high street bank due to inertia. I opened my first account with HSBC when I was 13! So I started there.
You Ethical Money rated HSBC as either green or amber on a variety of categories and I noted:
“HSBC’s environment policy covers the key areas of climate change/energy efficiency and waste management. The policy also contains a commitment to continued improvement in performance”, and; “HSBC’s business operations went carbon neutral in 2005” (www.yourethicalmoney.org, 13 January 2010).
Using Your Ethical Money, HSBC came out on top of the other main nationwide high street banks. But there is not much between them so I focused my search elsewhere.
Alterative High Street Banks
If you value the importance of alternative forms of business structures such as Cooperatives and Mutals rather than public limited companies, then The Cooperative Bank would be a natural choice.
When I first researched The Cooperative Bank in January 2010 they did not provide a business bank account other than if you were a member of the Federation of Small Businesses (FSB) or a community organisation. I called the Cooperative Business Banking Account Opening helpline and spoke with a helpful friendly lady. She explained that due to problems with their internet banking service they felt it was unfair to offer business banking services to new clients. They anticipated their new internet banking website would open in March/April 2010, although there was no fixed date as the site was being re-built. The original problem stemmed from the large number of businesses who moved over to Cooperative Bank in 2009 and their business internet banking could not take the volume of use. Hence given their contract with the FSB they only offer the FSB Business account at this time.
Review of their website on 14 April 2010 showed they are still not offering Business Bank Accounts.
Internet Based Bank
Your Ethical Money recommended Smile.
Research on the Smile website stated their current accounts could not be used for business purposes (clause 1.3 of their terms and conditions for the Smile Current Account). Hence although Smile are one of the more ethical and environmentally sound banks they do not provide business banking.
One of the most known ethical banks is Tiodos Bank. It won the Financial Times sustainable bank of the year 2009. However, for business services they only offer business banking to ‘Social Ventures’ and Charities. Their website states:
“The account is only available to businesses, charities and organisations that have clear social, environmental and cultural objectives. We limit this account in this way so that we can focus our resources on initiatives that are providing real added value for the wider community”.
A call was made to Triodos Bank on 14th January 2010, where they confirmed they do not offer business banking to a business which does not have a primary aim of being a social venture.
It’s hard to fault their values, but what about businesses which are trying to improve their ethical and environmental footprint?
Unity Trust Bank was recommended for its ethical criteria. They are a specialist bank offering services for social enterprises, charities, and trade unions. But they also offer banking services to commercial enterprises. They have explicit ethical policies of who they deal with, but no environmental policies were disclosed on their website or in the latest annual report. After sending an email to their general enquiries helpline and following up with a call, they spent nearly half an hour on the phone talking me through their progress on reducing their environmental impact.
The bank has implemented processes to reduce their environmental impact. However, they consider being ‘socially responsible’ to be their core value and hence use their air time to talk about those values. Based on my discussion with them, I felt they were a small bank who sounded like they were trying to move in the right direction and had made some good progress whilst facing the same challenges as other medium sized businesses. I hope to see them talk openly about their progress soon.
So what did I conclude?
I was sadly disappointed that there was a limited offering of business bank accounts for those businesses who wish to choose an ethically and environmentally sound bank but who are not themselves a social venture or charity.
Since I started this search I have spoken to others who have shared the same concern. So this is clearly an issue.
Please note, I am not an Independent Financial Advisor and I or my firm are not authorised by the FSA to conduct investment business. In no way is this blog offering investment or financial advice My research has not been scientific or conclusive. I have relied on information mainly in the media and research performed by myself and others and stress that anyone considering changing their banking provider should review their own personal circumstances and seek independent financial advice if desired.
As an afterthought to take away with you highlighting the nuances of trying to find an ethically and environmentally sound banking provider:
I did choose to place my business banking with HSBC as an interim measure whilst the market offering hopefully developed (like choosing one of the better ones of a bad bunch). To reduce my impact, I obviously wanted to turn off paper statements on my business bank account. After going into the branch where they said I’d have to wait to meet one of their advisors, and then fill out a paper form, they said I could use telephone banking to make the change. I rang the telephone banking service on 18 March 2010, to be told they could turn of the monthly paper statements. Great, a small achievement I thought. However, they would still send me the whole year’s statements on paper at the end of the year!! The customer service representative recognised that this didn’t really meet the aim of reducing paper use, but it was ‘policy’. I’ve yet to find a legal requirement for businesses to retain paper bank statements….. Apparently they’ve had similar feedback before. I asked to add my feedback to whatever log they had to get my message heard and hung up in dismay!
So I am still out there researching and hoping to find the right supplier for my business.