Top 5 LEAST ethical banks – and where to move for good

Written by Lori Campbell on 26th Jun 2024

How well do you know your bank?

The money you keep in your current or savings account doesn’t just sit in a vault with your name on it until you walk up to a cash machine. Banks use it for other purposes such as to make loans and investments – far too often to companies and projects that damage the environment and society.

Research shows the primary factor for consumers in choosing a main bank is “trustworthiness.” But when it comes to sustainability, fairness and ethics, the UK’s most popular banks really can’t be trusted.

A recent report by the European Central Bank found that those banks that talk up their green credentials, in fact lend more than others to brown industries (those with the highest greenhouse gas emissions).

Here, we round up the top five LEAST ethical banks (which between them hold a massive market share of 75 per cent of all UK banking customers).

We also show you below where to move your money for Good – the good of the planet, society and your pocket.

1. Barclays

Barclays boasts the most popular current account in the UK  – but it’s also the most unethical.

The high street giant’s record on the environment is so poor, it is dubbed the “dirtiest bank in Europe” by campaigners.

In 2023 alone, Barclays sunk $24.22 billion (£19.18 billion) into oil, coal and gas projects. This makes it the UK and Europe’s highest financier of fossil fuels (and ninth worldwide), according to the Banking on Climate Chaos 2024 report.

From 2016 – when the Paris Climate Agreement was reached – to 2023, Barclays provided $5.3 billion (£4.2 billion) to tar sands projects, according to  research by Urgewald for the Global Oil and Gas Exit List 2023. In April 2023, Barclays finally committed to scaling down its investment in tar sands following intense pressure from shareholders. However, it came under fire for failing to update its oil and gas policy.

In June 2024, Rail union RMT became the latest company to join the Boycott Barclays campaign, which targets the bank over its investments in military equipment companies supplying Israel with weaponry used to devastate Gaza. This followed multiple bands pulling out of the Download, Latitude and Isle of Wight festivals over Barclays’ Israel ties. This led to Barclays suspending its sponsorship of the events.

The Palestine Solidarity Campaign accuses Barclays of ‘funding genocide in Gaza’ and says on its website: “Barclays is bankrolling Israel’s genocidal assault on Palestinians through its financial ties with arms companies that sell weapons to Israel. We’re calling on all concerned people to boycott all Barclays services until the bank ends its complicity in Israel’s attacks on Palestinians. On our first collective account closure day, 9 February (2024), over 1500 people closed their bank accounts.”

Research by Ethical Consumer magazine highlights major ethical issues with Barclays’ approach to animal rights, human rights, workers’ rights, arms and military supply, political activities, anti-social finance and tax conduct.

Barclays disputes the findings of the Banking on Climate Chaos report referenced above. It also says criticism of its Israel links “mistakes” what it does.

The UK’s most ethical banks and building societies

2. HSBC (including First Direct)

HSBC has the highest gender pay gap of all the UK banks. Women at HSBC earn on average just 51.7p for every £1 paid to male colleagues, according to the company’s latest gender pay gap report. This pay gap was just 0.2 per cent than the previous year.

Last year, HSBC was found to be complicit in human rights abuses against Hong Kong residents by siding with Chinese authorities and denying pension payouts to those who fled the authoritarian crackdown. The bank has also been criticised for having links to the Myanmar military.

HSBC has long been one of the world’s biggest financiers of fossil fuels. From 2016 to 2023, it funded fossil fuel companies to the tune of $192.2 billion (£152 billion). This includes contributing $55 billion (£43.6 billion) to some of the world’s “most devastating fossil fuels projects” such as oil and gas extraction in Argentina’s Vaca Muerta region. In 2022, following long-running investor pressure, HSBC made a landmark announcement that it will no longer finance new oil and gas fields.

However, accusations of greenwash followed as it turned out HSBC’s policy only prohibits direct finance for specific projects, but not for the companies carrying out those projects.

In February 2024 HSBC was found to have worked on a billion-dollar oil deal (along with Santander – see below) in the Peruvian Amazon, despite also having a policy restricting finance that affects wetlands.

Frederic Hache, co-founder of the Green Finance Observatory thinktank, said: “Santander and HSBC’s business decisions, apparently contradicting their own sustainability policies, is a timely reminder that we cannot trust voluntary business initiatives and that nothing can replace environmental regulation.”

According to Ethical Consumer magazine, HSBC also has a poor record on deforestation, executive compensation, lobbying, tax conduct, and investments.

Top 7 ethical current accounts

3. Lloyds Bank

From 2016 to 2023, Lloyds bank funnelled around $21.6 billion (£17.1 billion) into fossil fuel companies. In October 2022, Lloyds pledged to stop financing fossil fuel ‘projects’ but made no such promise for fossil fuel ‘companies’.

This means that Lloyds may stop financing some oil rigs in regions like the Arctic ocean or Antarctica territories, but will still finance companies whose whole purposes is building and operating oil rigs in exactly those same places. Banks like Lloyds sometimes use ‘project’ divestment pledges like these as a first half-step to more meaningful commitments – but they have zero material impact.

According to Don’t Bank on the Bomb, Lloyds Bank invested $2.27 billion (£1.76 billion) in five companies that manufactured nuclear weapons between January 2020 and July 2022.

BankTrack accuses Lloyds of being involved in so-called “Dodgy Deals” with companies (including Shell, Cargill and Bunge) that are associated with significant deforestation, pollution and greenhouse gas emissions.

Lloyds has also been heavily criticised by Ethical Consumer magazine for excessive remuneration for its top directors. In 2022, the company’s highest paid director received over £1 million in total compensation. The group’s CEO, Charlie Nunn, received a total of £3.767 million.

4. Santander

From 2016 to 2023, Santander financed the fossil fuel sector with £79.9 billion (£63.2 billion).

Santander is listed by Amazon Watch as a leading financier to mining companies that encroach upon Indigenous lands in Brazil, particularly in the Amazon rainforest.  From Jan 2016 to October 2021 it gave $392 million (£305.6 million) in underwriting to Anglo American, Glenore, Minsur and Rio Tinto. It also had $191 million of shareholdings in Anglo American, Rio Tinto and Vale.

In February 2024, Santander was found to have arranged a billion-dollar deal to finance the Norperuano pipeline, owned by oil giant PetroPerú in the Peruvian Amazon rainforest. The pipeline has been the source of more than 53 oil leaks since 2013. PetroPerú spent more than $80m on cleaning up spills related to it between 2017 and 2020.

According to Don’t Bank on the Bomb, Santander invested $4.8 billion (£3.74 billion) in six companies that manufactured nuclear weapons between January 2020 and July 2022.

Santander is also criticised by Ethical Consumer magazine for excessive remuneration of its highest-paid directors, its ethical approach to animal rights, tax conduct, lobbying and investments.

The bank does not appear to have restrictions in place for investing in coal/carbon, deforestation, indiscriminate weapons, human rights abuses, and animal abuse.

Top 6 ethical current accounts

5. Natwest/ Royal Bank of Scotland

According to the Banking on Climate Chaos report 2024, Natwest invested $27.4 billion (£21.6 billion) in fossil fuels between 2016 and 2023.

Last year, Natwest pledged to stop funding new customers looking to finance fossil fuel projects and will look to stop financing existing customers by the end of 2025.

However, it still has a long way to go.

The bank is linked by BankTrack to a number of “Dodgy Deals” – as a current or past financier or through an expression of interest – with controversial companies. These include the Gulhifalhu Reclamation Project in the Maldives, which involves huge land reclamation, dredging and construction in an ecologically sensitive area, with devastating impacts on nature and biodiversity. Natwest has also helped to finance US palm oil companies Bunge and Cargill among others.

According to Don’t Bank on the Bomb, Natwest invested $2.03 billion (£1.79 billion) in six companies that manufactured nuclear weapons between January 2020 and July 2022.

In November 2022, Natwest was named in the “No questions asked: Profiting from the construction and hotel boom in Qatar” report by Fair Finance International. The report covered the role of financial institutions in the human and workers right abuses that took place in the construction and hotel industries ahead of the 2022 Qatar Football World Cup. Natwest was named as a company financing Qatar’s hospitality and construction sector with loans and underwritings of $295 million (£234 million) and $494 million (£392 million) respectively.

The bank has also been criticised by Ethical Consumer magazine for excessive remuneration – in 2022 its highest paid director was paid £5.25 million – as well as its ethical approach to animal cruelty, tax avoidance strategies, and anti-social finance.

Greenwash allegations

In June 2024, Make My Money Matter called on financial and advertising watchdogs to probe into allegations of greenwashing by the five banks listed here.

The Financial Conduct Authority’s new anti-greenwashing rule demands that sustainability claims made by financial firms provide consumers be “fair, clean and not misleading.” Make My Money Matter is pressing for an examination into the “mismatch” between the banks’ climate pledges and their actual funding practices.

Where to move your money for GOOD

Switching bank is a really simple and FREE way to help bring about positive change.

A typical monthly salary removed from one of the Big Five and instead banked with a more environmentally-friendly provider ultimately means reducing the flow of finance to destructive industries such as fossil fuels and deforestation.

Ethical banks and building societies avoid investing in environmentally harmful or otherwise unethical industries, treat their staff and customers fairly, and pay their share of tax. The gold standard in ethical banking is Triodos Bank,  which goes further than simply avoiding the bad stuff – it only invests your money to make a positive impact on the planet and society.

For ethical current accounts, we also like Nationwide Building Society, Cumberland Building Society and Engage, as well as digital challengers such as Starling Bank. A recent report by Which? named Nationwide, The Co-operative Bank and Triodos as their Eco Providers. It found they have no exposure to fossil fuels in their banking activities.

For ethical savings accounts, we like the above as well as Charity Bank, Coventry Building SocietyEcology Building Society, Gatehouse Bank and Tandem Bank.

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