Does your money align with your values? In Part Two of our ethical money series, Nicole Lutze unpacks ethical banking and what the money in your bank is doing while it's not being used.
If you haven’t read Part One of this series, learn about ethical superannuation and investing here.
Have you ever considered that every time you buy your locally-grown groceries or donate to a cause you care about, the rest of the money in your bank account isn’t sitting idle; that it’s being put to use?
If you, like many in the Live for Less community, are living more consciously to lower carbon emissions, it’s important that you take a look at where your money is stored. Aligning with a bank that shares your values can be one of the simplest ways you lower your carbon footprint.
This month, Nicole Lutze spoke to Bank Australia to help you navigate ethical banking.
Ethical banking is thinking about the business of banking as a way to create a positive impact.
LIVE FOR LESS: What is the difference between a customer-owned bank and a shareholder-owned bank?
BANK AUSTRALIA: In a customer-owned bank, each customer receives one share in the bank when they open an account, meaning nobody can gather up shares and have more influence than anyone else.
A shareholder-owned bank is on the stock exchange, so people who aren’t customers can gather up shares. This can create some tension for those banks trying to balance the needs of shareholders and customers.
What is ethical banking?
Ethical banking is thinking about the business of banking as a way to create a positive impact. That positive impact can be for the financial wellbeing of our customers and helping them achieve their objectives, but it’s also about being conscious of how money works in the communities that we operate in, and the planet.
To meet these standards, Bank Australia avoids lending to companies and sectors that profit from live animal exports, gambling or fossil fuels, for example. Instead, we support community housing and renewable energy projects, amongst others.
What is divestment?
The money in your bank account doesn’t sit there waiting for you. Your bank uses it and lends it to other people and industries. So divestment is a movement across the world where people are making choices about what they want their money to fund.
Does Bank Australia fund overseas projects or companies?
We are wholly Australian based, and all of our customers and the projects that we fund are in Australia. We think we have a responsibility to try and invest in things that are going to create a fairer, more sustainable future in Australia.
Do other banks fund overseas projects?
A number of the major banks have international arms that invest all over the world, and I think some of them have associated with superannuation and investment funds that are investing globally.
There are organisations who work to figure out which banks are investing in which sectors of the economy, here and overseas. If people are looking for more transparency around where banks are investing, they should look to:
- The Responsible Institute Association of Australasia;
- Market Forces, who particularly focus on fossil fuel investment; and
- Don’t Bank on The Bomb, who provide information about banks investing in the nuclear weapons industry.
Do your customers have full disclosure of Bank Australia’s investments, including materiality thresholds?
We provide information about where we invest, and we have a long history of doing quite detailed impact reporting, which discloses how much money we have invested and in which sector.
Our Impact Finance team are currently working hard to develop reports for each project, and in the future we hope to provide information about the projects and locations where money is going.
We haven’t reached the point where we can disclose materiality thresholds for each project or company we fund; however, we screen each potential client to ensure they comply with our responsible banking policy.
Are banks required to disclose what they’re funding fully?
No, the current legislation doesn’t require banks or superannuation funds to disclose their funding. Each is left to make their own judgement about how much they reveal.
We think we have a responsibility to try and invest in things that are going to create a fairer, more sustainable future in Australia.
What incentives do you offer customers to help them reduce their carbon footprint?
We try to build incentives into our products that encourage people to make more sustainable choices.
Our clean energy home loans, for example, provide a discount for houses with a minimum seven-star rating. These loans can also lend for energy-efficient improvements, such as solar panels.
Our car loans provide discounted rates for people who are choosing to buy a hybrid or electric vehicle.
Is my money safe in an ethical bank?
Yes, in Australia, it is. All Australian banks have to comply with the same federal regulations.
A few banks now claim to be ethical or have ethical accounts. How do I know which ones I can trust?
The RIAA, provides certification to banks and products in banks, and you can check the credentials of your bank on their website.
The Global Alliance for Banking on Values is an organisation of global banks who adhere to particular ways of operating, like ourselves. Their website also provides a list. Currently, there are two in Australia: Bank Australia, and a Teachers Mutual Bank.
What does Bank Australia hope the future of banking will look like in this country?
We are interested in leading a conversation about how money can do good in the world, and want more people to be inspired by banking. Solutions exist for the climate crisis, and there are ways to improve social issues, but the projects need more funds behind them to make a difference.
There are lots of Australians who care about the future of our community and the planet, and we hope more people will align their values with their banking.
Is there anything people should consider before switching banks?
People need to do their own homework, evaluate the issues they are passionate about, and ask their bank about those issues. Then, with all the information, you can make a judgement about where you feel most comfortable placing your money.
Bank Australia started in 1957 as Co-operative Credit Society for the CSIRO. Since then, Bank Australia has grown, combining 72 credit unions and co-operatives to become Australia’s first customer-owned bank.
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