We all know that we need to do our part to save the planet. But sometimes it can be difficult to know where to start. One area where we can make a big impact is our banking habits.
In this guide, we will discuss how you can switch to ethical, or environmentally friendly banks in Australia.
We will also look at the different options available to you when it comes to ethical banking, including home loans.
So if you’re ready to make a change and help save the planet, keep reading!
Table of Contents
What is Ethical Banking?
Ethical banking, also known as sustainable or responsible banking, refers to financial institutions that consider the environmental and social impact of their investments and operations.
These banks aim to support positive change by avoiding investments in harmful industries like fossil fuels and instead focusing on renewable energy, community projects, and sustainable businesses.
Why Choose an Ethical Bank?
Choosing an ethical bank allows you to align your financial decisions with your values. By banking with an institution that prioritises sustainability, you can:
- Reduce your carbon footprint indirectly
- Support environmentally friendly initiatives
- Encourage other banks to adopt more sustainable practices
- Feel confident that your money isn’t supporting harmful industries
Choose your bank wisely and save the planet
In this section, I’ll give you some of the tips and takeaways that I’ve learnt around banking and how it directly affects the environment.
How can you be environmentally aware when choosing a bank?
When it comes to choosing a bank, environmental awareness should be one of your top priorities.
After all, the banking industry can have a significant impact on the environment due to its investments in fossil fuels and other resources.
One way to stay environmentally conscious is to do your research before selecting a bank.
Start by looking at their track record in terms of sustainability and green practices.
Some banks have even made commitments to adopt greener policies in their business operations, meaning you can trust them to keep the planet’s best interests in mind as they make financial decisions.
In addition, look for banks that offer products like low-impact credit cards or special investment accounts that invest your money into sustainable ventures rather than industries with negative environmental impacts.
With these simple steps, you can be sure that your banking choices are helping to support an environmentally friendly future.
How do I determine if a bank is ethical and environmentally friendly?
Determining whether or not a bank can be considered ethical and environmentally friendly can be a bit of a challenge, as there are many factors to consider.
For one thing, you need to look at the bank’s overall business practices, including things like its lending policies, investment decisions, and fee structures.
In addition, you need to evaluate the bank’s stance on issues like climate change and the protection of local wildlife and habitat.
Finally, you should analyze any programs that the bank offers to promote sustainability or help customers become more eco-friendly.
Overall, it is important to do your research in order to determine whether a particular financial institution truly prioritizes ethical and environmentally conscious practices.
Luckily, you don’t need to do all of this research yourself.
Market Forces has created a table that shows the fossil fuel investment positions of over 115 banks, credit unions, and building societies.
If you’re banking with any of the big four, then here’s a bit of bad news for you.
ANZ, Commonwealth Bank, National Australia Bank and Westpac all invest millions of dollars into fossil fuels.
So if banking with an ethical bank is important to you, you may want to switch.
Which banks are funding fossil fuels?
Here is a list of all of the banks that are funding fossil fuels:
- AMP
- ANZ
- Bank of China
- Bank of Queensland
- Citi
- Commonwealth Bank
- HSBC
- ING
- Macquarie
- National Australia Bank
- Westpac
Which Banks are NOT investing in fossil fuels?
If you’d like to make a change to a bank that is investing in the future of our planet rather than its destruction, here are the banks that are not investing in fossil fuels.
Bendigo Bank
Bendigo Bank always talks about its strong focus on giving back to the community.
And in this instance, they really practice what they preach.
Bendigo Bank stated that they have made a conscious decision to reduce and offset their impact. They outlined that they don’t lend money to projects in the coal and coal seam gas sector.
Teachers Mutual Bank
Out of all the banks, Teachers Mutual Bank seems to tick all of the boxes.
Not only are they investing in environmentally friendly resources. But they are also considered a very ethical bank (we will get to the difference in chapter two).
To add to that, those who are applying for a loan and buying environmentally friendly products will also be rewarded with reduced rates.
This includes purchasing green cars or upgrades on their homes in a more environmentally friendly way – like solar panels, greywater treatment systems and rainwater tanks.
Suncorp
Ok, so Suncorp Bank has actually switched teams. So kudos to them!
Suncorp had initially invested $1,049m in fossil fuels but have since withdrawn from the sector. They released a statement saying:
“We no longer have any exposure [to fossil fuel companies] as Suncorp Bank only provides lending to personal, SME and agribusiness clients”.
Heritage Bank
Heritage Bank has also confirmed that they don’t invest with companies in the coal and gas sector.
Banks owned by banks that invest in fossil fuels
Your bank didn’t get mentioned? Well, they’re not in the clear year. This is where it gets tricky.
Just like Bank West is owned by Commonwealth Bank, many smaller banks are branched off a large corporation.
So technically they’re still a part of it.
Here are the banks that are owned by banks that invest in fossil fuels.
Take a look at the table below for details.
Green banking options from Australia's big banks
In a push to move forward with more environmentally friendly options, some of Australia’s biggest banks are looking to make the world a little greener. These include helping to make it cheaper for consumers to buy environmentally friendly products for our home, like solar panels and batteries.
Some of these schemes include:
Commonwealth Bank of Australia (CBA) – Green Home Loan
CBA has recently released an ultra-low, secured fixed-rate loan with no establishment fee, monthly loan or service fees. The minimum loan size is $5,000 and maximum loan size is $20,000 and is limited to be used on energy-efficient products like solar panels, battery packs and solar hot water systems. More info here.
CBA also announced a Green Home Loan Offer which is available on homes that can be used on homes that are rates NATHERS 7 star or greater or meet the following criteria:
- Option 1: Your home is a certified Green Building Council of Australia (GBCA) Green Star Home or;
- Option 2: Your home meets all of the following criteria:
- Nationwide House Energy Rating Scheme (NatHERS) = 7 stars or greater
- Electrified through installation of a heat pump hot water system and no gas
- Solar PV
Bendigo Bank Green Home Loan
If you are considering building or renovating your home using energy-efficient products Bendigo bank can provide cheaper home loans, and personal loans with rates starting from 4.99%. More info here.
Bank Australia Cleaner Car Loans
Bank Australia is offering discounts on car loans and lower fees if you choose to buy a lower emission vehicle, more info here.
Macquarie Bank Electric Vehicle Loan
Macquarie is also trying to assist with reducing the costs to buy an electric vehicle with their discounted home loans, more info here.
What about environmentally friendly products?
So you may be familiar with environmentally products and packages offered by particular banks.
For example, UBank offers the Green Term Deposit.
This product invests money put into this account into climate-friendly projects like solar energy and low carbon transport.
So really, the debate is if the broader corporation is still investing other funds into fossil fuels, where do you draw the line?
I’ll leave that to your discretion.
How can I save the planet with my banking habits?
So we’ve learnt about which banks are climate-friendly, and which aren’t so much.
But on a smaller scale, there are changes you can make to ensure your banking is as environmentally friendly as possible.
Let’s take a look.
How do my banking habits affect the environment?
Have you ever thought about how many bank statements will be mailed to you throughout your lifetime?
Aside from paper costs, add to that transport of the letter to get there.
In reality, the technology shift is helping us all save in resources but there’s more you can do.
- Use internet banking or apps when you can. Instead of visiting the branch, bank online! This helps save resources, as with fewer branches, less energy will be used to maintain them.
- Stop getting statements mailed to you. Opt to get them emailed instead. This saves paper and resources to send it to you. To be honest, I find it so much easier for filing purposes too!
Where can I get more information about environmentally friendly banking?
There are a few different websites for you to learn more about both environmentally friendly and ethical banking.
Take a look at them below:
What about ethical banking?
Ethical banking can be a term that is hard to define. Especially in the banking sector.
But in general, we can assume the following:
An ethical bank doesn’t lend money to fossil fuels, gambling, arms, tobacco and live exports.
Ethical banking can be further clarified as a bank that focuses on values-driven by social and environmental responsibility.
The Australian definition of ethical banking would assume that an ethical bank does not have exposure to, invest in or trade with any of the following:
- Tobacco
- Fossil fuels and coal mining
- Deforestation
- Mining of precious minerals and other materials)
- Weapons (guns or other arms)
- Human exploitation or human rights abuses
- Gambling
- Pornography or sex slave trade
- Animal cruelty
For example, on Bank Australia’s website, they state that they don’t lend to these industries, which outlines it nice and clear.
The Ethisphere determines which companies are the most ethical in the world.
The following banking institutions were mentioned in 2017 as some of the most ethical.
- Allstate Insurance (mortgage lender, car insurance, home insurance, farm insurance)
- Arthur J Gallagher Insurance (US-based insurance company with branches in Australia)
- Northern Trust (asset management)
- Principal Financial Group (retirement solutions, insurance)
- Teachers Mutual Bank (mortgage lender, bank accounts, credit cards, insurance) *** [Also mentioned in the environmentally friendly list]
- TIAA (asset management, financial advice, investment solutions)
- USAA (banking services, life insurance, health insurance, car insurance, home insurance, investments)
Bonus: Mortgage Broker vs Bank - 3 tips to help you choose
When it comes to securing a mortgage, there are many different options available. You could choose to work with a bank, or you could opt for the services of a mortgage broker. Although both have certain advantages and drawbacks, there are a few key factors that can help you to decide which option is right for your needs.
- Specialist vs generalist. Mortgage brokers are specialists in home loans, whilst banks have an array of other duties to fulfil, from helping customers deposit to balancing the books each day. So which would you rather have to help you make one of the most important purchases of your life? A specialist or a generalist?
- Customer satisfaction. The Mortgage and Finance Association of Australia found that over 90% of broker customers were satisfied with the service they receive and that brokers’ Net Promoter Scores were over 70. On the other hand, the major banks are regularly in negative NPS territory, and the highest score is only in the 50s
- Variety of selection. Here is the deal, banks are not going to tell you that there are better interest rates at another bank. On the other hand, going through a broker gives you a choice among a wide range of banks or lenders, which means you can get the deal that best suits you.
Frequently Asked Questions (FAQs)
What are ethical banks in Australia?
Ethical banks in Australia are financial institutions that prioritize socially responsible and environmentally sustainable investments. They typically avoid investing in industries such as fossil fuels, weapons, tobacco, and gambling, and instead focus on supporting renewable energy, affordable housing, and other ethical initiatives.
Which Australian banks are considered ethical?
Some Australian banks considered ethical include Bank Australia, Teachers Mutual Bank, and Heritage Bank. These institutions have policies against investing in fossil fuels and other industries that may be harmful to the environment or society.
How do ethical banks differ from traditional banks?
Ethical banks differ from traditional banks by prioritising social and environmental impacts alongside financial returns. They often have transparent investment policies, support sustainable projects, and may offer products specifically designed to benefit local communities or the environment.
Can I get a home loan from an ethical bank in Australia?
Yes, many ethical banks in Australia offer home loans. These loans may come with competitive rates and terms similar to those offered by traditional banks, while also aligning with environmentally and socially responsible practices.
Are home loans from ethical banks more expensive?
Not necessarily. While rates may vary, ethical banks often offer competitive home loan products. It’s important to compare offers from multiple lenders to find the best deal for your specific situation.
Do ethical banks offer the same range of products as traditional banks?
Most ethical banks offer a wide range of banking products, including savings accounts, term deposits, credit cards, and home loans. However, the specific product range may vary between institutions.
How can I verify if a bank is truly ethical?
You can research a bank’s ethical credentials by reviewing their public policies, checking their investments and lending practices, and looking for certifications such as B Corp status or membership in the Global Alliance for Banking on Values.
What is the Global Alliance for Banking on Values?
The Global Alliance for Banking on Values (GABV) is an independent network of banks committed to advancing positive change in the banking sector. Member banks prioritisze social and environmental impact alongside financial sustainability.
Are ethical banks in Australia government-backed like major banks?
Many ethical banks in Australia are authorised deposit-taking institutions (ADIs) and are covered by the government’s Financial Claims Scheme, which protects deposits up to $250,000 per account holder per ADI.
Can I switch my existing home loan to an ethical bank?
Yes, it’s possible to refinance your existing home loan with an ethical bank. However, you should consider any associated costs and ensure the new loan terms are favourable before making the switch.
Do ethical banks offer mortgage broker services?
Some ethical banks may work with mortgage brokers, while others may prefer direct customer relationships. It’s best to check with the specific bank you’re interested in to understand their approach to mortgage brokers.
What types of sustainable projects do ethical banks typically support?
Ethical banks often support projects in renewable energy, sustainable agriculture, affordable housing, education, healthcare, and community development.
Are there any tax benefits to banking with an ethical institution in Australia?
While there are no specific tax benefits for banking with ethical institutions in Australia, some may offer products that provide tax advantages, such as certain types of savings accounts or investments.
How do ethical banks’ home loan approval processes compare to traditional banks?
Ethical banks generally follow similar approval processes to traditional banks, assessing factors like income, credit history, and loan-to-value ratio. However, they may also consider additional factors related to the environmental impact of the property.
Can I get a green home loan from an ethical bank in Australia?
Yes, some ethical banks in Australia offer green home loans, which may provide discounted interest rates for energy-efficient homes or for making environmental improvements to existing properties.
Get expert assistance with finding a home loan from an ethical bank
Our team at Hunter Galloway is here to help you buy a home in Brisbane. Unlike other mortgage brokers who are just one person operations, we have an entire team of experts dedicated to help make your home loan journey as simple as possible.
If you want to get started, please give us a call on 1300 088 065 or book a free assessment online to see how we can help.
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