Many of us want to do our bit for the planet, and one way of doing this is by thinking about where your money is going – even when you’re not currently using it.
There are all sorts of ethical or ‘green’ financial products out there, where your money can be invested into good causes, including green pensions and ethical stocks and shares ISAs, and you can even go green with your savings account.
In this article, we’ll explain how green savings accounts work, which providers offer them, and why you might want to consider putting your money in one.
What are ethical savings accounts?
An ethical savings account, otherwise known as a green savings account, is a type of savings account that uses customer deposits mainly or exclusively in ways that are considered ethical. These may include investing in projects and industries promoting the environment and social change, or funding other ethical products they offer such as green mortgages.
The exact causes a bank invests in will vary, so if you have a particular area of social or environmental change you would like to support, you might want to do some background research before committing to a particular provider and its products.
However, generally speaking these types of savings accounts will steer clear of investing in companies involved in industries such as tobacco, fossil fuels, arms manufacturing, alcohol, gambling and so on.
How do I know if a savings account is really ethical?
It can be tricky knowing which savings accounts are true to their word about being ethical. It’s not all that unusual for some companies to market themselves as sustainable while not really living up to that image, simply because there aren’t industry standard definitions for terms like ‘ethical’ or ‘green’, or regulations around who can market themselves that way. In some cases, they may simply invest in ways that are not considered explicitly unethical (such as those examples listed above), but which aren’t especially positively impactful either.
If you are unsure about a particular bank or savings provider, the best course of action is usually to go an extra step and see if you can check what products or organisations they invest your savings deposits into. Some of the more reputable sustainable banks, such as Triodos, maintain a transparency policy meaning that anyone can view which charities and companies they invest in on their website or app. On the other hand, if a bank refuses to publish where they invest the money from their ethical savings account, you might have reason to be sceptical.
You could also see if the company has a ‘Good Egg’ mark from Good With Money, which is awarded only to companies that fulfil their criteria for demonstrating a positive impact across environmental, social and industry/customer-related causes.
Which banks offer ethical savings accounts?
Here are a few examples of banks and financial organisations offering green savings accounts.
Paragon Bank’s green savings accounts are used exclusively to fund their green mortgages, which in turn encourage buy-to-let borrowers to boost their property’s energy rating to access discounts. Similarly, the Ecology Building Society uses deposits to fund mortgages on eco-friendly new builds and home improvements. You can read more about ethical mortgage products in our article What is a green mortgage?
Another example is Triodos Bank’s everyday savings account. One of the world’s largest sustainable banks, Triodos only lends to organisations “making a positive change for society, culture or the environment”.
National Savings and Investments (NS&I) also offers a green savings bond, a three year fixed-rate savings account where funds are used exclusively towards environmental causes such as wind farms, electric vehicles and public transport.
Are the rates as good as those offered by other savings accounts?
As with other types of savings accounts, there is a great deal of variety when it comes to the returns offered by ethical savings accounts, but going green doesn’t mean you have to settle for paltry returns. Some, such as the NS&I green savings bond and Paragon’s Green 3 Year Fixed Rate Savings Account offer competitive rates (2.95% and 4.95% respectively), though in both cases you’ll have to be happy to lock your money away for the three-year term.
Other green savings accounts, such as those offered by Triodos and the Ecology Building Society, come at slightly lower rates, but with easy or increased access should you want to make withdrawals. As with any kind of savings decision, the right account for you will depend on what your financial priorities are and whether you might need to access the money in the near future.
Learn about more green finance products
If you like the idea of investing ethically but also want to enjoy the tax benefits of an ISA structure, you can read our article What is an ethical investment ISA to learn about stocks and shares ISAs with a green focus.
Or, you can learn about other green financial products with our articles How green is your pension? and What is a green mortgage?
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