7 ways your bank could be unethical – and what to do

Written by Lori Campbell on 8th Apr 2024

From fossil fuels and deforestation to nuclear weapons and human rights abuses, our banks enable some of the most damaging industries and projects in the world to thrive.

Where we choose to bank is not an inconsequential decision. Banks use our money to lend out to other customers and to invest for a profit – and the decisions they make shape our environment, economies, societies and future.

Here we look at seven key ways your bank could be unethical – and what you can do about it.

1. Funding the climate crisis

Since the landmark Paris Agreement in 2016, the world’s 60 biggest banks have invested a mammoth $5.5 trillion (£4.36 trillion) in fossil fuel companies. In 2022 alone, these banks put $673 billion (£533 billion)  into the industry, despite “clear and dire” warnings from experts that any further fossil fuel expansion will result in climate and economic chaos.

Many of these projects also harm the communities and ecosystems directly around them. Coal mines, pipelines and other fossil fuel projects are notorious for violating the rights of indigenous people, polluting local lands and waterways, and causing dangerous air pollution and deforestation.

How to ditch your fossil fuel-funding bank

2. Avoiding tax

The financial industry is notorious for avoiding paying its fair share of tax. Tax avoidance takes much needed money from the public purse, and forces low income countries to choose between slashing their own tax rates and risking profits being shifted elsewhere.

Every year, global tax avoidance costs up to £475 billion, with the poorest countries consistently pay the highest price from it.

In 2019, HSBC was fined $192 million (£152 million) after admitting to helping US customers hide more than $1 billion (£792 million) in assets from tax authorities.

In 2022, Barclays was accused of avoiding paying up to £1.8 billion in UK corporate tax. It was also embroiled in ‘Europe’s biggest ever tax scandal,’ dubbed Cum-Ex. Cum-Ex was a controversial ‘double-dipping’ trading strategy that exploited a loophole in how dividend tax was collected so that multiple investors could claim refunds on a tax that was only paid once.

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3. Funding human rights abuses

Banks pump money into companies behind some of the worst human rights abuses in the world.

European banks have provided over €20 billion (£17.15 billion) in funding to the organisations selling arms for conflicts in Israel, Iraq, Libya, Syria, and Yemen – wars that have cost thousands of innocent lives and caused widespread displacement and suffering in those countries.

Banks are also funding companies actively involved in Israeli settlements, that have been declared illegal under international law. According to War on Want, Barclays provides billions of pounds worth of investment and loans to arms companies selling weapons and military technology to Israel.

A number of banks have been found to fund mines implicated in serious human and labour rights violations.

Lloyds, Santander, HSBC and Allianz have all been named and shamed in NGO reports for their links to specific human rights abuses.

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4. Funding arms

High street banks are also funding some of the world’s most notorious arms companies producing nuclear weapons and cluster munitions. Cluster munitions are weapons that spread dozens, or even hundreds, of smaller bombs over an area the size of a football stadium, which explode on impact. They have been banned by over 120 countries, because of their indiscriminate impact on civilians.

Barclays and Legal & General were among the top 10 European investors in arms companies overall between 2020 and 2022, according to a report by Global Alliance for Banking on Values, contributing $6 billion (£4.76 billion) and $5 billion (£3.96 billion) respectively.

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5. Funding animal exploitation

Banks fund companies involved in the exploitation and abuse of animals, such as industrial meat companies, factory farming, or pharmaceutical companies involved in animal testing.

A 2021 report by Shifting Values found that “almost half of the banks and investors evaluated have no policy to prevent the worst forms of animal cruelty when deciding on their loans and funding. Only one in ten banks obtained more than half of the total achievable score.”

A 2023 report by World Animal Protection UK found that Barclays, HSBC, Lloyds, Metro Bank, and Santander are likely to be funding animal cruelty through the companies they finance. The report analysed 10 of the UK’s biggest banks and found that these five, by not having a policy, are likely to be investing customers’ funds in cruel practices, such as factory farming, captive animal entertainment and animal testing.

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6. Excessive directors’ pay and bonuses

The financial industry is notorious for excessive pay of their directors and other senior staff.

In 2022, Barclays paid £5.2 million to its highest paid director. In the same year, HSBC rewarded its highest paid director with £4.9 million, Lloyds paid out £4.6 million and NatWest gave £4.3 million.

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7. Gender and ethnic pay gaps

Britain’s finance industry is notorious for its gender pay gap, with women working for the worst offenders earning HALF of what men do. There is also a staggering gender bonus gap, with women receiving on average up to a third of what men in the same company do.

Gender pay gap: the UK’s most unequal banks

So, what can you do about it?

1. Switch accounts

This is the quickest and most powerful move you can make. Switching banks is easier than ever thanks to the Current Account Switch Service, who will take care of everything for you.

For more ethical options see our articles on the UK’s most ethical banks and building societiestop nine ethical savings accounts, top 7 ethical business current accounts and top 7 ethical current accounts.

2. Write to your bank

Like all companies, banks care what customers think, especially if it starts to cost them.

If you are switching accounts and want to let your previous bank know why, Ethical Consumer has a useful template letter you can use.

3. Avoid the Big 5

If you want to avoid the worst of the bunch, don’t bank with one of the Big 5. These are Barclays, Lloyds, Santander, HSBC and Standard Chartered.

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