I used to consider my aunt as a hippie growing her own vegetables with recycled waste water and celebrating the annual World Energy Day on a weekly basis ‘Amish style’ in the dark. She still religiously rides her push bike to work in her batty full body raincoat in the cold and wet of a Melbourne winter. She would have also been one of the small handful of consumers who had the time and bother to research where and how her hard-earned money was being spent. Without a doubt, this would have included the local community bank where she invested her savings and set up her mortgage to buy her energy efficient home.
Kudos to her, a decade or two later and it seems some of her quirks are becoming mainstream, including everyday banking. More consumers are embracing opportunities to conduct their banking with organisations that are considered ‘ethical lenders’, that is banks that embrace socially conscious and environmentally friendly practices that do not conflict with shareholder or customer interests.
These financial institutions generally try to avoid investing in or lending to companies or industries that could be considered harmful to the community or environment such as fossil fuels (the four major banks in Australia have lent $35b in the last 6 years to fossil fuel industry*), deforestation, gambling and tobacco. Instead, many ‘ethical lenders’ claim to be carbon neutral organisations and may focus on investing in social projects such as affordable housing and renewable energy. Moreover, these banks often differentiate themselves through their social standing with heavy community and charity involvement, and a corporate culture typically devoid of the scandals that have been plaguing a lot of lenders around lending practices. However, as with any organisation promoting themselves as ‘ethical’ or ‘sustainable’, the ‘ethics’ can be subjective and you need to investigate each company individually to ensure they align with your ethical beliefs and that their practices are policy-led, rather than just ‘green’ marketing.
So what do ‘ethical lenders’ offer the average consumer aside from a clear conscience?
While my aunt may sleep better at night knowing her money is sitting with a ‘green’ lender, most of us prefer to translate benefits into more tangible dollars and cents as well. However, the two are not necessarily mutually exclusive, many ethical lenders are offering their customers a combination of the following:
- Green term deposits, where the bank will make contributions towards renewable energy.
- Green car loans at reduced interest rates – another incentive for considering an electric or hybrid vehicle.
- Discounted personal loan rates to fund solar panels or energy efficient products.
- Green home loans for building or buying energy-efficient properties.
Okay but what if you’re stuck with your current petrol guzzler and are not in the market for a new 7 star+ rating home?
Fret not, because there are ethical lenders that offer home loan products for you to refinance your existing mortgage and their product offerings can be very competitive when suitable.
Currently there are offers in the market for unique fixed-rate home loans from 1.95%pa with a full offset account*.
Is your current bank ethical?
For most of us that bank with the majors it would depend on the news of day, especially post Royal Commission. If you do want to consider making a switch towards an ‘ethical lender’, it’s important you identify what values are most important to you and prioritise them as there may be some limitations or grey areas. A lender may offer a ‘green’ product but still conduct activities that negatively impact the environment or community. If you prefer the legwork be done for you, consider talking to your lending consultant and advise them of your priorities. And if you want to go a step further, my aunt has a tandem push bike the next time you need to travel and with her years of practice will also certainly do most of the legwork.
Disclaimer: * The information contained in this site is general and is not intended to serve as advice as your personal circumstances have not been considered. DPM Financial Services Group recommends you obtain personal advice concerning specific matters before making a decision.