Personal Finance: Banks Told It's Time to Get Ethical. ; the Co-Op Leads the Way on Ethical Banking and Now Customers of Other Banks Are Demanding That Their Money Isn't Used to Fund Practices They Don't Agree with. Rachel Fixsen Reports
Fixsen, Rachel, The Independent (London, England)
Is your bank moral? Does it have operations in countries with oppressive regimes? How much does it give to charity? As long as their money is safe and attracts a decent rate of interest, many people don't want to know how their bank conducts the rest of its business. But a growing number are concerned about banking ethics.
Ethical investing has become far more widespread in the last few years. While five years ago over pounds 1bn was invested in ethical retail investment funds, they now hold around pounds 4bn. So public companies are having to focus on how they operate ethically.
Last July, an amendment to the Pension Act 1995 obliged all company pension trustees to declare their fund's socially responsible investment (SRI) stance in the fund's statement of investment principles. As pension funds are a huge force in the stock market, this requirement is having a direct impact on companies' ethical policies. And two months ago a series of FTSE4Good indices were launched, listing companies with good records of corporate social responsibility.
But pressure on the banks to sharpen up their act is coming from customers as well as shareholders, says Karen Eldridge of the Ethical Investment Research Service (EIRIS). "We are getting inquiries from people about how they can bank ethically," she says. "If you think ethically in other areas of your life - for instance if you are a vegetarian - then it makes sense to apply that to your banking as well."
According to a review by EIRIS of the main 12 UK banks and former building societies and the largest 10 remaining building societies, the number and range of ethical banking policies is growing. Four major retail banks said they adopted some form of restrictive approach to lending to the arms industry, and a small number were looking at their own social and environmental impact on local and global communities,
Banks are also now starting to address the problem of financial exclusion, according to the survey. Most now offer basic accounts into which benefits and any other income can be deposited. Ms Eldridge says the huge interest in the Co-operative Bank demonstrates that ethical issues are important to account holders.
The Co-operative Bank says a third of its new customers say that its ethical stance was the main reason for them joining the bank. Dave Smith, spokesman for the bank, says when it first launched its ethical policy in 1992, the bank had 1.2 million customer accounts. It now has more than three million. …