How our financial choices have the power to effect positive change, both for your personal financial wellbeing and the world around us.
Many of us, myself included, would consider ourselves to be both informed and ethical consumers. In fact, I’d hazard a guess and say it’s probably part of the reason why you’ve landed on this blog post. In a world ravaged not only by a global pandemic but by rising sea levels, increasing occurrences of climate-related natural disasters, and an ever-widening disparity in the distribution of wealth, it’s easy to understand why we’re concerned for the future of our planet.
Luckily, not only do we now, more than ever, take care to understand where our products and services are coming from, but are more keenly aware of the power our choices as consumers hold. Even so, when faced with what can seem like a bleak global outlook, it’s still overwhelming figuring out exactly how best to enact change. Thankfully most of us have started to take at least some action. We’ve watched ‘Fight for Planet A,’ hastily making sure water-saving showerheads are installed throughout the house and that the recycling is going in the right bin. We’ve read up on both the ethical and environmental dilemmas of fast fashion and have reduced our consumption, and we always carry a keep cup (covid restrictions allowing). However, are we still turning a blind eye when it comes to the topic of ethical banking?
With a staggering 40% of Australian’s still with the same bank they signed up with as a child, the in-school banking programs employed by the major Australian banks have proved to be incredibly enterprising marketing tools. Having seared their brand’s legacy in customer’s minds, the major retail banks have successfully ensured the ‘if it’s not broke, don’t fix it‘ trope rings true. In all honesty, it makes sense! As humans, it’s natural for us to not only trust what we know but to prefer the familiar. However, with our banking portfolios having grown in scope from the days of deposits of birthday money from grandma, to large scale home loans and investments, isn’t it time we asked not only how our money can work better for us, but for the world too?
It’s no secret that there have been some glaring issues circulating recently regarding our major retail banks in Australia. With allegations such as banks funding child exploitation through failing to obey anti-money laundering and counter-terror finance laws dominating the headlines over the past year, you would be right to be concerned about who is looking after your money. Combine this with the over 35.5 billion dollars loaned to fossil fuels by our four major retail banks since 2016 lining up with a catastrophic 2019/2020 bushfire season, the time to take action is now.
Don’t get me wrong; the simple changes we’re already making as ethical consumers are positive steps forward, as every little bit counts. However, switching your banking to a fund that doesn’t contribute to our ever-growing climate crisis while getting a better deal for your needs and giving back to our community is not as difficult as it may seem.
What is an ethical bank?
In a very simple sense, banks pay clients (by giving them interest) to hold their funds whilst charging others more interest to borrow said funds; in other words, selling money for profit. The issue here isn’t the profit itself, but how it’s used. Non-ethical banks can (and will) use these profits to fund industries that potentially do not line up with our own beliefs and values. However an ethical bank functions to operates primarily beyond their ‘socially and economic function in order to be ethical in some way,’ usually by way of following a form of socially and/or environmentally conscious lending criteria.
We make hundreds of choices daily, primarily motivated by an ingrained value system. Suppose our value system encourages us to buy recycled bin bags at the supermarket or take the bus instead of driving (because we’re acting for the greater environmental good). Does it then make sense for us to be paying for these same goods with a bank that invests back into fossil fuels? It seems obvious, putting it this way, that we choose a different financial provider. However, what are some of the other reasons we should change to an ethical bank, and how can this also be of financial benefit?
- They’re transparent about where their profits are going.
Transparency is one of the most obvious reasons to switch to an ethical bank. If you’re aware of where your bank’s profits are going, then the risk of your funds being invested in a cause that doesn’t align with your values is greatly diminished. To find out exactly what your current bank is investing in or loaning to, you can check out Market Forces, a website designed to expose institutions financing environmentally destructive projects. If you’re after advice on which ethical institution might be best for you, especially when it comes to your home loan, check out the link on our homepage.
2. Their customers are some of the most satisfied
If spectacular service is what you’re searching for, look no further than a mutual (ethical) bank. Not only did they take out the top 5 positions for customer satisfaction in the most recent Roy Morgan Australian banking survey, but they continued to deliver the highest levels of customer satisfaction throughout the Covid-19 pandemic. They’ve also proven to be more proactive in their contact with clients, helping the financially vulnerable find appropriate solutions before significant problems arise.
3. There’s power in numbers.
The mutual banking sector in Australia is growing. In 2019 credit unions, mutual banks, and building societies (read ethicals) lent more than 90 billion dollars in housing to Australians. Now in 2020, there are 67 customer-owned financial institutions with 131 billion in assets and 107 billion dollars in deposits. What this means for clients is that they keep the market diversified, allowing increased competition and choice for consumers. This is a good thing, as not only are we trying to do good here, but we’re searching for the best rate!
4. Invest back in you and your community.
Ethical banks tend to be smaller in size and, because they’re customer-owned, are more focused on customer wants and needs. What this means for you is a passing on of savings (through lower fees & better rates) and a higher level of customer service. It also means the constant struggle between investing in customers and investing in shareholders is negated, as the customer is the shareholder.
5. You could get a better deal.
If you’re with your current bank purely because they were the institution you started banking with, then it is highly likely that there are now rates and products outside their scope better suited to your financial needs and goals. Even if you have changed institutions recently (or at some point), given the volatility of the year that has been 2020, you may still be able to get a better and more ethical deal. Given that most ethical banks offer interest rates and fees that are lower than most retail banks on average, it would make sense to at least see what options are available to you. For free advice on how to potentially get a better deal and more ethical home loan, click here.
6. Feel good factor
It’s no secret that doing good makes us feel good. I don’t know about you, but after living through a year as tumultuous as 2020, any chance to make a difference both to my own wellbeing and the wellbeing of the world and community around me is definitely a good thing! As a bonus, when you use a company such as Benevolence Financial Group to help you find a more ethical choice for your home loan, you have the opportunity to further invest back into your community through their company charity partnerships.
7. Making the switch isn’t that hard.
One of the most significant barriers to switching financial providers is the perceived level of effort involved in the process. However, it’s not that difficult of a task, especially when, out of three-in-five Australians who have switched banks, 67% have found a better deal.
Overall, switching to a more socially and environmentally responsible financial institution can have substantial benefits for your personal financial wellbeing and the wellbeing of the environment and community around you. If you’re wondering where to start when switching financial institutions, especially when it comes to your home loan, let Benevolence Financial Group guide you along the way. Our free brokerage services can help you ensure you’re getting the best ethical loan for your financial needs.
Disclaimer: The information provided is general in nature and does not constitute financial advice. Please speak to us for recommendations on your individual circumstance and requirements.