Let’s be honest. It’s not all the time we think about banks being ethical or green banks. Sometimes, we don’t even know which banks are seen as leaders in sustainability or deemed ethical in Australia. This is why it’s not surprising that choosing your bank with the environment in mind has never occurred to many people. But that may be about to change after reading this article. 

We’re at an age where many people are becoming more socially conscious consumers. Society is becoming more considerate about global warming, climate change, and human activities that affect our environment. But many people have never stopped to think about how these activities are often funded.

Banks can play a significant role. When you have savings, banking institutions pay interest so that you will save your money with them. These same banks then charge higher interest from individuals willing to borrow money by way of home loans or personal loans, credit cards, and business loans. This is often referred to as net interest margin, and is a key metric that banks are often judged by. To maximise shareholder value, many banks lend money to businesses that are invested in the fossil fuel industry and the gas sector. 

Research by Market Forces shows that as at 2016, the major banks in Australia invested more in the fossil fuel industry than in renewable energy, often several times over. In doing so, these banks create an unsustainable finance roadmap that doesn’t assist, and may actually adversely affect climate change. 

Some banking activities lead to gross environmental degradation, but there are other banks invest in climate-friendly projects. Ethical banking services also include business practices with mindful lending criteria that positively affect the economy. 

And although ethical banking may not be the first priority that comes to mind when you’re looking for a home loan, now’s a great time to start thinking about it. If you’re interested in doing your part, you can engage in values-based banking by making a socially responsible investment for the planet’s health. 

A socially responsible Australian bank can reduce our carbon footprint and, at the same time, many lenders are finding that it creates a sustainable business model for their shareholders, and a positive experience for homeowners looking for a mortgage. 

To start, we will discuss what ethical banking is before looking at examples of ethical banks in Australia.  

What Is Ethical Banking? 

There is no agreed-upon definition of ethical banking in the banking sector. But here are some things to think about when a bank makes mention of them being an ethical lender.  

• An ethical bank is socially responsible and practices values-based banking, promoting a sustainable future. 
• An ethical bank does not lend money to fossil fuel companies and the coal and gas sector. 
• An ethical bank’s operations do not extend to deforestation, animal cruelty, and weapons. 

Rather, an ethical bank strives to operate in an environmentally responsible manner. Apart from banks, some political organisations understand the essence of environmentally friendly projects.

Who Cares About Ethical Banking?

More and more people are starting to understand the direct impact that their day-to-day choices lead companies and banks to focus their efforts on. Millenials and younger Australians are more involved in choosing to support companies that align with their own individual values. As a demographic, this group of people continue to build their wealth and become more of a juggernaut to be reckoned with. It’s also expected that many will inherit large sums of money in the decade to come, and as such, the purchasing power they hold grows more and more each day. First home buyers and expats are often the keenest to understand the sustainable lender options available to them.

Does Ethical Banking Mean Higher Fees?

Not at all. There’s no evidence of banks who have a more socially responsible outlook charging higher fees or interest rates to their customers. Adding to this, the number of banks and institutions who are signing on to environmentally friendly policies suggests that there is a growing market that’s being swayed towards sustainability.

Most Ethical Bank Australia 

Market Forces provides a track record of where each bank and lender provides funds. They provide a very detailed list on their website and are a great place to start. Further, there is only one Australian lender that has made the honour roll for the Ethisphere Institute. These are businesses whom do not invest in fossil fuels and are ethical companies that have made a global alliance to protect the environment.

Teachers Mutual Bank 

Teachers Mutual Bank was once a credit union before it became a mutual bank. It practices a world-leading ethical business. This lender ticks all the boxes and has been described as one of the world’s most ethical companies by the Ethisphere Institute. This bank is the only Australian bank to be nominated by the Responsible Investment Association Australasia as a responsible investment leader.

Teachers Mutual Bank makes a responsible investment in environmentally friendly resources.

Their investments include solar panels, green cars, rainwater tanks, and greywater treatment systems. 

UniBank, Firefighters Mutual Bank, Health Professionals Bank, and Teachers Mutual Bank are part of the Teachers Mutual Bank Limited. These branches of Teachers Mutual Bank Limited combine for over 220,000 members and they strive to practice fossil fuel exclusion and ethical and social responsibility. 

Other Ethical Banks Australia

Whilst by no means a complete list, here are a small selection of lenders that practice what they preach when it comes to sustainability practices.

Adelaide & Bendigo Bank

Bendigo Bank always mentions investing in society, and it always does so. Bendigo Bank makes a conscious effort to reduce its contribution to global warming and climate change. And the bank makes it a point not to invest in fossil fuels or the coal and gas sector. 

Suncorp

Although Suncorp practised wholesale funding by investing hundreds of millions of dollars to the fossil fuel industry, the bank has pivoted in recent years. They released a statement announcing that the now ethical company would only invest in personal, SME and agribusiness projects.  

Auswide Bank

Auswide might be known as sponsors of the Queensland Rugby League team, but they are a leader in environmental and social sustainability. They note they are committed to protecting the environment in both their banking and operating practices.

MyState Bank

A Tasmanian bank with a national footprint, MyState doesn’t invest in any coal, gas, oil projects.

It is also worth noting that National Australia Bank and Westpac have been on Ethisphere’s list of sustainable companies in years gone by, but not in recent years. These results were decided by these banks’ involvement in the following factors. 

• The revenue they make from clean services and products.
• The number of resources they use for energy and water 
• The number of women they have in executive management
• Employee or management time and how those in executive management show excellence, practice social responsibility 

These two banks might be involved in fossil fuels, but their activities show that some profits have come from clean services.

Green Banking In Australia 

The following banks uphold a sustainable finance roadmap so the environment can be protected where possible from global warming. The following financial institutions offer services for consumers that utilise products such as solar hot water systems that promote low carbon transport.  

Commonwealth Bank – Green Mortgage Initiative

This scheme encourages environmentally conscious Commonwealth Bank mortgage holders to implement practices like installing solar panels. When you take up these climate-friendly projects, you receive cashback offers and other incentives for your decisions. 

Bendigo Bank Green Home Loan and Secured Green Personal Loans

Bendigo Bank was one of the very first lenders to look at rewarding clients who were using energy efficient services. In March 2022, they reached a 20 year celebration of environmentally friendly purchase assistance by offering bigger discounts on loans for solar panels, batteries, electric vehicle charging stations, and solar hot water.

Bank Australia – Car Loans For A Cleaner Planet 

Bank Australia issues car loans that are planet-friendly loans. They offset your emission estimates for the period the loan will last under the National Carbon Offset Standard. On top of that, Bank Australia covers all electricity costs that you might use from the grid.  

Bank Australia also has a Clean Energy Home Loan plan that rewards customers who buy high-standard energy efficiency homes. If your home meets their requirement, the home loan plan might give you a discount.

U-Bank Green Term Deposits

As a subsidiary of the National Australia Bank, U-Bank holds wholesale funds for investment in solar and wind energy, low carbon transport, and buildings.

You might be wondering why your bank is not included in the lists of banks that do and do not invest in fossil fuels. Well, the reason is that it could be a subsidiary of some of these banks. Let’s take a look at some of them. 

Subsidiaries Owned By Banks That Contribute to Climate Change 

• Bankwest is owned by Commonwealth Bank, and it funds fossil fuels activities. 
• UBank is a subsidiary of NAB, and it funds fossil fuel industry and activities.
• St George is owned by Westpac, whom fund fossil fuel industries
• 86 400 made a statement on the 3rd of February 2020 before NAB acquired it. The bank stated that it wouldn’t lend its money to industries involved in fossil fuels. But on the 19th of May 2021, NAB, which invests in fossil fuel, acquired 86 400. As at June 2022, 86400 has now been rebranded as UBank.
• ME Bank was until recently a leader in sustainability, and a quote from ME Bank read: “ME does not have any investments in the mining industry, including the coal and gas export industries, and does not intend to invest in these industries in future.” ME Bank was bought out and acquired by Bank of Queensland whom do invest in fossil fuels.  
• RAMS is owned by Westpac which invests in fossil fuels.

Although some of these subsidiaries may not be investing in or have invested in fossil fuel industries themselves, their owners and parent companies may have a different position.

Practising Environmentally Safe Banking 

Banking practices have come a long way from years gone by. Nowadays, new features have been added to ensure that individuals get not only a competitive service, but that lender values align with their consumers’ worldviews. One benefit from recent years has been the introduction and implementation of digital and online offerings, providing less wastage, and a smaller carbon footprint.

Some examples of such are that online banking reduces paper waste via digital receipts and transactions. In turn, this leads to lower usage of paper and indirectly deforestation.

Second, online banking curbs the effects that carbon dioxide, a part of fossil fuels, has on the environment. For instance, you can request that your savings accounts statements be emailed to you, your entire relationship with your bank being digital. Without this online banking system, you’d have to drive to or visit the bank, often increasing your carbon footprint.

Although these might seem minor, they’re convenient as well. It is much easier to find your statements online than it is to hunt down a paper statement in a pile of unread mail.

How To Tell If Your Bank Is Ethical

Now more than ever, people seek out socially responsible investment options. Many people prefer ethical companies and banking services. Being a member of a responsible investment association is one example that lenders can take to demonstrate their commitment to sustainability.  

Practising ethical banking is relatively easy and over time will make us more socially conscious consumers. Before investing or taking out a loan, you can do your own ethical company assessment. 

Consider your option if the bank funds fossil fuels and has personal objectives that align with your values.

Whilst we’ve spoken in depth about fossil fuels, you might have your own priorities. Are you more concerned about animal rights, human rights, tobacco, firearms? Researching a little prior to setting up your banking partner will help you understand the kind of banks or credit unions you’re looking for.

You can find more on ethical banking from the following sources. 

• Ethisphere
• Market Forces
• Shop Ethical
• BankTrack

Good environmentally friendly banks do not simply avoid investment in factors that may be seen as unsustainable, but they also reinvest their monies responsibly.

Final Words

It’s never too late to start considering your footprint when it comes to your banking options, especially if you’re concerned about the environment. Ensure that your retail deposits are made with institutions that meet your own goals and align with your values. If you do decide to make a change and your bank asks you why you’re leaving, you can explain your reasoning.

Finally, you can decide if you want to invest in renewable energy or climate-friendly activities.

As an ethics conscious Australian mortgage broker in Sydney, finding you the best home loan will always be the foremost priority. So feel free to communicate your needs regarding socially responsible investments and loans and we’ll make sure to find you the best fit!