How to be an ethical saver

It is possible to earn interest on your savings and do some good along the way.

Making sure consumers’ ethical values are reflected in their personal finances has never been a more popular issue.

But while ethical investing has a large profile, the same cannot yet be said for saving.

However, it is possible to save for the future while making sure that our money does some good along the way.

The main way is to pick a savings provider that will not reinvest your money in things you might disagree with.

Many savings providers reinvest savers’ cash into areas that many find wrong, such as tobacco, armaments, alcohol, oil and more.

By choosing the right bank, you will know your money is not being used to fund anything that you view as a negative impact on society. 

There is no single definition of “ethical” and it can mean different things to different people.

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So it is important to research banks and building societies to ensure they match your values, according to Anna Bowes, co-founder of Savings Champion.

Ethical banks

Two of the best-known ethical banks are Triodos Bank and the Ecology Building Society.

Triodos says it only finances companies “that focus on people, the environment or culture” and that have a positive impact.

Its list of blacklisted companies includes those trading in weapons, tobacco, pornography, fur, fossil fuels, or those involved in animal testing and inhumane farming methods.

Ecology says it is dedicated to improving the environment by supporting and promoting green building practices and sustainable communities.

Another option is Charity Bank, which says that it has a “strict policy of only lending to charities, social enterprises and organisations with a charitable aim, where the loan is being used for a social purpose”.

Building societies

Building societies that might not advertise their ethics can also be an option for savers who want their money to do good.

Building societies were originally set up with a simple business model – to use savers’ cash to fund mortgages for people in the local area, with no other investing involved. Many still have this model.

Not only this, but many are also vital parts of their community and give money to local charities.

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Building societies commonly offer deals called affinity accounts, where savers can earn interest and the society makes a yearly donation to charity.

But savers should do their research, as many building societies now operate more like banks and may invest in areas that some find distasteful.

National Savings & Investments

Even depositing money in the government-backed savings firm National Savings & Investments (NS&I) could be seen as ethical because it will help pay off the national debt from Covid-19, adds Bowes.

Sharia deals

Savers could also look to Sharia-compliant savings accounts, which comply with Islamic law but are available to any saver, regardless of religion or culture.

Sharia law outlaws benefiting from restricted practices such as gambling, pornography, alcohol or tobacco, so these deals will never invest in those areas.

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Rates may suffer

However, ethical savings rates may not be as attractive as the interest paid by their non-ethical rivals.

This is in part because of banks’ costs for time spent filtering out unethical investments and also because they exclude potentially profitable areas.

But savers can still get very good returns for ethical deals, and these will almost always beat the interest paid by high street banks.

Bowes says: “Ethical banks do offer good savings rates, but even if they do not offer the best rates in the market, at least you know they will be doing the right thing with your money.

“With interest rates as low as they are at the moment, savers may not be losing out on a huge amount anyway.”

Useful indicators

You can search on Your Ethical Money to find out more about banks’ ethical credentials, from whether they lend to companies with poor human rights records to how many women sit on their board.

Another indicator is the Good Egg mark, which is awarded to financial firms that can prove they make a positive impact.