Our exclusive research reveals who’s prioritising ethics over interest rate
Financial services firms don’t have the greatest reputation for being ethical.
In fact, many of the biggest high street banks have been heavily criticised for using customer money to invest in harmful industries and projects such as fossil fuels, while other providers fund arms manufacturing and tobacco companies.
When we talk about ethical money, be it banking, investments or pensions, we’re talking about what providers use your money for once you’ve deposited it.
The most ethical companies will use it to fund practices that aim to do good, such as community projects, renewable energy and affordable housing. Some will use your funds to offer mortgages. The rest, however, may invest in harmful industries, as I’ve mentioned above.
But how important is it to the British public for their money to do good? And how likely are they to prioritise ethics over interest rates? We asked and here’s what you told us.
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Gen Z aren’t bothered about ethical finance
Despite 62% of Gen Z (those aged between 18 and 24 in our survey) claiming that they prefer to buy from sustainable brands, with 73% willing to pay more for sustainable products, when it comes to their savings, our research suggests they’re not fussed about the harm their money could do.
In fact, just 28% of Gen Z say the ethics of their savings provider is important to them.
This is only just slightly higher than 45-54 year olds (26%) who are the age group who cares least about ethical finances, while it’s the same proportion of 55-64 year olds.
This is an interesting reveal given the focus this generation put on sustainable spending – they’re happy to pay more for products sold by businesses that try to reduce harm, yet don’t have the same consideration when it comes to their savings.
You’d think the same principles would apply and they’d be happy taking a hit on their interest rate if they knew their money was doing good for the world – but that’s not the case.
We can’t even say they don’t realise what their money could be funding as only 26% of Gen Z aren’t aware their money could be invested in harmful practices.
They’re also the only age group that doesn’t put their savings interest rate at the top of their priority list. Instead, what Gen Z do care about when it comes to financial services is how trustworthy the company is (60%), the customer service (54%) followed by the interest rate (43%).
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But millennials put their money where their mouth is
Meanwhile, millennials (people aged between 29 and 44) prioritise the ethics of their bank ahead of other age groups.
Our research shows that 58% of this age group consider a provider’s ethical stance when choosing a savings product. They are also twice as likely as the general population (22% vs 11%) to offset less ethical financial choices by volunteering or making charitable donations.
This makes sense to me. This generation may be more socially conscious and considerate compared to older generations, and have had more time to put certain things into practice, compared to Gen Z savers. They may also have a bit more money and stability than younger people which means they’re in a better position to prioritise financial providers whose ethics match their own over returns.
Some savers don’t realise what their money could be funding
Fewer than one in five (19%) savers check whether their money could be invested in industries they might object to while a third (33%) say they don’t even realise banks and other financial service providers even do this with customer cash.
It’s not always that easy to find this information but you can try and find the information out on the provider’s website or in their Annual Reports which are available to the public. And our team at Be Clever With Your Cash also provides regular options of the best ethical savings accounts on the market.
For most, the interest rate is the priority when it comes to savings
Almost half (42%) of UK adults would choose getting a good interest rate over a savings provider’s ethics. Others would prioritise the trustworthiness of the provider or customer service ahead of considering what harmful projects their money might be funding.
And whilst 20% of Brits state they are interested in banking ethically, many feel that the returns are often too low for them to make the switch.
At Be Clever With Your Cash, we update the top savings accounts every day, based on rate. However, you’ll also find more ethical providers in our best buy tables, such as building societies, which must lend 75% of their funds to home buyers, meaning they don’t have the cash to invest elsewhere, and Sharia accounts which can’t use customer case to fund industries against Islamic law, like tobacco or gambling.
Some providers have their own sustainability policies, like Triodos Bank, however these are less likely to appear in our best buy tables. But they’re worth checking out if green banking is a priority to you.
You don’t need to compromise on rates
We all want to get the best returns on our money and trying to make sure our cash is being used for good can feel like a step too many for UK savers. But if ethics and sustainability are important to you, you can still get decent rates while putting your money where your mouth is.
A good place to start is with a building society, whether that’s a larger one such as Nationwide and Coventry, or smaller ones like Monmouthshire and Ecology. Plus we often see Sharia banks like Al Rayan and BLME in our best buy tables for fixed rate accounts.