Ethical Bank Accounts

Ethical Banking & Current Accounts

Ethical banking means using a bank that:

• doesn't invest your money in things like fossil fuels, weapons, gambling, tobacco and other unethical industries
• does invest your money in positive areas, such as renewable energy

Choosing an ethical bank is one of the simplest and most ethically productive things you can do. 

With scores ranging from 0 to 96 out of 100, our guide has plenty of recommended banks and building societies that are doing things better than the big high street banks. 

The dominance of corporate power is one of the main causes of the multitude of global issues we face today. It is not the only cause, but from climate change and biodiversity loss to rampant inequality and rising levels of obesity, powerful corporations – often multinational – have played a driving role.

But corporations do not exist in a vacuum, they frequently rely on credit and investment from banks and other financial institutions. In 2024 alone, lending by UK banks to non-financial UK businesses amounted to £485.9 billion. The question thus arises: which banks are financing those corporations and sectors that are responsible for so many of the harms we witness in the news?

Because banks play such an important role in shaping the wider economy around us, choosing an ethical bank account is consistently in our list of the most impactful changes that any individual can make.

Banks offering current accounts

In this guide to ethical current accounts, we look at a wide range of banks and financial institutions, from the biggest banks in the market to ethical alternatives and building societies.

The UK current account market is dominated by a few big banking groups: the 'big 4' have 71% market share. The 'big 4' are Barclays, HSBC, Lloyds Banking Group and NatWest Group.

However, as will become clear in this guide, most of these big banks do not perform well on ethics. Smaller banks, building societies, and new digital banks may not be big household names, but they generally score more highly.  

The good news is that it is easy to switch bank and there are some great ethical choices readily available. 

What is ethical banking?

It’s probably easiest to start by looking at what unethical banking is because, unfortunately, that is the norm.

There are many sectors that most people would agree are harmful – fossil fuels, for example. Many banks are still funding this sector, despite the need for us to move away from coal, oil, and gas. 

Unfortunately some of the big four banks appear to be going soft on earlier commitments in this area. For example, Barclays and NatWest will cut climate goals from the annual bonus schemes of their senior executives.

Another example is the nuclear weapons industry. Some of the UK’s biggest banks are financing companies manufacturing nuclear weapons, yet you wouldn’t know this from walking into your local Barclays (if you are lucky enough to still have an in-person branch near you).

Other unethical financial can include animal exploitation and animal vivisection, and unethical policies around pay, tax, and equality.

Financing positive change

In contrast, ethical banks and building societies do not finance these harmful sectors, and some actively pursue investments that create positive value – investing in renewable energy companies, or lending to businesses involved in regenerative agriculture, for example.

Our conception of ethical banking also includes other factors, which we have accounted for in our research:

• Climate – Is the bank taking sufficient action to tackle climate change?
• Company ethos – What is the bank’s overall ethos? Does it have an alternative business model (such as a mutual)? Does it pay its directors excessive amounts? Does it guarantee its staff a living wage?
• Tax conduct – Is the bank paying its fair share of tax or is it funnelling funds through subsidiaries in far-flung jurisdictions that facilitate tax avoidance?

Banks don't just passively process money but actively reshape industries, communities and ecosystems through their lending and investment choices.

Different types of finance companies

Companies that offer current accounts can roughly be split into the following groups:

Mainstream banks

These are the banks that most people will have heard of and are often called the 'big four' UK banks: Barclays, HSBC, Lloyds Banking Group and NatWest Group; plus the giant overseas companies Danske, JP Morgan Chase, and Santander. 

They are business-as-usual banks, and they score very poorly from an ethical standpoint. Sure, they might be household names, but they are likely financing some dodgy stuff.

Ethical banks

This category is a little harder to define, but Triodos and the Co-operative Bank definitely sit here. These are banks that are built on fundamentally different principles to mainstream banks and have robust ethical policies that govern their lending and investments.

Al Rayan could potentially be placed in this category as it claims to be guided by ethical, Sharia principles, though it didn’t score particularly well against our rating system.

What is Sharia banking?

Sharia (or Islamic) banking offers an ‘expected return’ rather than an interest rate, but financially it works out similarly for you. It operates within Islamic laws and principles which include:

• not charging interest on financial transactions
• not benefiting from restricted practices like gambling, pornography, alcohol or tobacco
• not speculating in high-risk investments or in deals with extreme uncertainty
• emphasising asset-backed financing, where transactions are based on tangible assets such as real estate, commodities, or equipment
• sharing profit and risk between banks and consumers

In this guide to current accounts Al Rayan offers Sharia banking. (And in our savings account guide we have included Al Rayan and Gatehouse Bank).

Neobanks (digital banks)

Neobanks are generally not that “neo” these days as the main ones (Monzo, Revolut, Starling) have been around for over a decade. But these banks only operate online, without traditional banking branches.

Up until recently they haven’t been around long enough, nor have they generally been big enough, to engage in anything that unethical (they are unlikely to be funding large oil infrastructure projects, for example). But they are now significant players in the banking scene with sizeable turnovers, meaning that what they do with their money is becoming increasingly important.

They generally sit around the middle of the score table – not having done much wrong, but not having done that much right either. We hope that they will develop more robust ethical policies as they grow larger.

Building societies

Building societies are mutual organisations, owned by their members. At least 75% of a building society’s business assets must be in the form of loans and mortgages secured on residential property, so they are extremely unlikely to be lending to any particularly harmful sectors, such as fossil fuels or arms manufacturing.

Many building societies, such as Nationwide and Cumberland, offer savings accounts and current accounts, though some, including Cumberland, only offer services within a certain geographic area. 

There are far more building societies available than we have been able to review in this guide. Although we have not rated all of them, they are generally a good option if you want to shift away from the more unethical big banks.

Unique new rating for ethical lending

We have developed a special rating for finance companies to assess their lending policies in more detail. Our two new categories are 'lending policy' and 'loans & investments'.

This more detailed level of analysis has resulted in a much greater variation in score performance than before. The best do really well, and the worst do really poorly.

Lending Policy

One of the most significant things that banks and other financial institutions do is lend money to individuals and businesses.

It is well known that start-ups often borrow money, but large companies also do it, especially when they embark on major projects, such as building a new oil pipeline.

This rating looks at what policies banks have around their lending, and how transparent they are about who they lend to.

Transparency & ethical policy

The financial system is not very transparent, and most banks do not disclose their commercial loans. We awarded points to any banks that disclosed their entire loan portfolio. Only one bank achieved this: Triodos.

We also looked at whether banks had an ethical policy that covered all loans, and whether that policy prohibited the following:

• loans financing the expansion of the fossil fuel sector
• loans to the arms/military sector
• loans to companies linked to significant workers' rights abuses
• loans to companies linked to oppressive regimes
• loans to companies involved in factory farming

Building societies primarily lend to the housing/mortgage sector, so were awarded marks because they were very unlikely to be making loans related to the above. Those that did have exclusions around any of the above were given extra points.

Points were available for banks with a policy that gives preference or special treatment to charities, co-operatives and more points for banks whose core purpose is providing loans to environmental or social projects.

Excluding complex financial instruments

We also awarded points to banks that have a policy excluding the use of complex financial instruments such as derivatives.

While it is argued that financial derivatives can help redistribute risk in the financial system, others argue that they potentially have a destabilising effect and were a contributor to the 2008 financial crisis.

A parliamentary report on derivatives and their role in the financial crisis concluded: “some forms of derivatives can be used as tools for speculation by participants in the financial market who have ownership of the underlying asset. Coupled with a lack of transparency in the market ... derivatives could help destabilise the financial system, particularly if there is a significant shift in the value of underlying assets.”

Others have gone further in their condemnation of these complex financial instruments. John Lanchester points out that the value of all economic activity in the world is estimated at $105 trillion, while the value of the financial derivatives arising from this economic activity is $667 trillion. “That makes it the biggest business in the world. And in terms of the things it produces, that business is useless. It does nothing and adds no value. It is just one speculator betting against another and for every winner, on every single transaction, there is an exactly equivalent loser.”

Most major banks are fully engaged in trading derivatives and other complex financial instruments, but some aren’t. Triodos, for example, had the following policy: “We only work in the real economy and we don’t invest in complex financial instruments.”

Other banks that had similar policies were Al Rayan and Co-op Bank. (For banks which offer savings accounts it also includes Gatehouse and Reliance.)

Building societies also picked up marks here because, bar several specific exemptions, they are prohibited by law from “entering into any transactions involving derivative investments.”

Loans & Investments

While the lending policy rating looks at banks’ policies, the 'loans & investments' rating looks at their actual lending and investments. 

As most banks don’t disclose their loans and investments it is hard to find out exactly what they are financing, but fortunately a network of NGOs and journalists dedicate their time to illuminating this shady area of the economy.

For this rating, we relied on a selection of reports produced by other organisations, amalgamating the data to get an overall view of what banks are financing. We’d like to thank these organisations for the fantastic work they do in making the financial system more transparent.

For this rating, each company starts with a score of 100, and marks are generally lost, but in some instances can be gained. If a bank wasn’t featured in a report, it neither lost nor gained marks.

The reports or research we used were:

• Banking on Climate Chaos (coalition including Rainforest Action Network and BankTrack)
• Global Human Rights Benchmark 2024 (BankTrack)
• Don't Buy into Occupation 2024 (DBIO Coalition)
• Forest 500 (Global Canopy)
• Banks for Animals 2024 (Sinergia Animal)
• Don’t Bank on the Bomb 2023 (PAX and ICAN – the International Campaign to Abolish Nuclear Weapons)

Banks and weapons

Several high street banks are funding some of the world’s most notorious arms companies. 

In a separate feature article, we look at which banks are financing the arms industry, and in particular, those linked to Israeli settlements, weapons, and military. 

Banks and the climate

The biggest source of emissions for banks and building societies is the activities they finance. Compared to two years ago, when we last reviewed this sector, banks are now going further in calculating their financed emissions and discussing how they are going to reduce them, at least from the highest emitting sectors. 

But there is still a long way to go, as only Triodos and Nationwide had calculated all their emissions, including financed emissions, and had credible targets and plans for how to reduce them.

Many banks still finance the fossil fuels sector. 

Our climate rating deducts points if a company is involved in the development of new fossil fuel projects or if they are involved in any way in coal, whether the projects are new or old. For banks, financing of projects is considered involvement. The following banks lost these marks: 

• Barclays
• Danske
• HSBC
• ICICI
• JP Morgan Chase
• NatWest
• TSB’s parent Banco de Sabadell
• Santander

Companies can also lose marks for putting out misleading messages on the actions they’re taking to reduce their climate impact. Both Lloyds and HSBC lost these marks as they were found by the Advertising Standards Authority to have omitted significant information from their advertising about their continued financing of fossil fuels, such as to mislead the public about their actions to address climate change (ASA ruling on Lloyds; ASA ruling on HSBC). 

Al Rayan and the Co-op Bank also lost marks as they claimed to be carbon neutral in their operations. As this was achieved through offsetting and did not take into account the carbon impact of the activities they were financing, this was considered to be misleading.

Tax conduct of banks

Under EU law, banks are required to report their profits and tax on a country-by-country basis. Unlike other sectors, this makes it easy to see if they are shifting profits to low-tax countries.

Despite this transparency, many banks still have subsidiaries in tax havens and most of the banks in this guide scored 0 (out of 100) for this rating category. 

Barclays has subsidiaries in lots of tax havens including Hong Kong, Isle of Man, Jersey, Guernsey, and Switzerland. 

In 2021, the EU Tax Observatory published research which analysed banks’ country-by-country reporting of tax and profits for the years 2014 to 2020. They calculated that because of its presence in tax havens Barclays had a particularly low effective tax rate of around 11%. HSBC had a slightly higher effective tax rate but according to the report it booked well over 50% of its pre-tax profits in tax havens. 

The study estimated that in 2020 Barclays’ tax deficit (the difference between what the bank paid in taxes and what they would pay if they were subject to a minimum effective tax rate in each country) was €346m and HSBC’s was €510m. The research hasn’t been updated recently so current figures aren’t known, but the research showed that, during the years it covered, both banks’ presence in tax havens was increasing.

Co-op Bank, Cumberland, Monzo, and Triodos have no subsidiaries in tax havens and scored 100 (full marks).

In the past, Nationwide has got top marks for tax conduct but it has dropped slightly to 70. This is because in October 2024 it acquired Virgin Money which has one subsidiary in Jersey.

Banks and high pay

Banks are notorious for high pay at the top. Our separate feature article highlights the massive pay packets that some CEOs receive, and lists which banks pay more modest salaries.

We also show the pay gap ratio. This is how many times more the CEOs receive compared with the rest of the employees. 

Once again, the high street banks have the worst performance on this. Compare the two ratios below:

• HSBC pays its CEO 283 times as much as its lowest-paid employees
• Charity Bank pays its CEO only 6.5 times as much as its lowest-paid employees

Company ethos of banks

Almost two thirds of banks in the guide scored 0 (out of 100) in our 'company ethos' rating. 

They lost marks for a variety of reasons including involvement in controversial sectors (such as fossil fuels and military supply), excessive director pay, and membership of corporate lobby groups. 

The top scorers in this category were Triodos, and Co-operative Bank. 

Triodos wasn’t involved in any controversial sectors, didn’t pay any director over £1m, had a positive approach to pay ratios (in 2023 the ratio of the highest full-time salary to the median full-time salary was 4.9), and was considered to be providing a social and environmental alternative to mainstream banking through its sustainable lending and investing. 

The Co-op Bank scored highly for similar reasons. It received marks for being part of a mutual society as it was bought by the Coventry Building Society at the start of 2025 and the building society has stated that it wants all Co-op customers to become members.

The Cumberland Building Society also scored well as it’s a mutual, isn’t involved in controversial sectors and doesn’t pay any director over £1m.

Paying living wages

The sector did relatively well on payment of living wages. 

The following banks/building societies were Living Wage certified: 

• Barclays
• Cumberland
• Handelsbanken
• HSBC
• Lloyds
• Monzo
• Nationwide
• NatWest
• Santander
• Starling
• Triodos
• TSB