This week is National Ethical Investment Week (NEIW). But how do you choose an ethical financial product, and can they offer good value for money in addition to the feel good factor?
It’s around a year since I switched my bank account to Co-operative Bank. Attracted by the Co-op’s clear ethical policy, I’ve been broadly happy with the switch, but am aware it’s cost me money.
The Co-op’s current account doesn’t pay credit interest, doesn’t come with an interest-free overdraft and doesn’t pay cashback or rewards. Other banks do. However, it does leave me with a clear conscience, knowing that my money isn’t being invested in markets of which I disapprove. And it always does well for customer service in Which? surveys.
A good investment egg
As well as a current account, I also looked for an ethical home for my savings. I know I’m going to use my savings in the next couple of years, so I’m keeping them cash-based, rather than taking a risk on the stock market.
First of all, I put some money into my local credit union. However, I wanted some certainty on the returns I would earn – most credit unions pay retrospective dividends, so you don’t know in advance how much you’ll earn.
Next I considered ethical provider Triodos as I like its environmental focus. However, Triodos is based in Holland so savings are covered under the Dutch compensation scheme, rather than the UK’s Financial Services Compensation Scheme (FSCS). While it’s unlikely that Triodos will go bust, I prefer the simplicity of dealing with the UK compensation scheme if the worst happened.
Ethical banking products
Charity Bank, which lends money to charities and community organisations, has proved to be a good solution. It pays 2.05% AER on its cash Isa (not currently open to new customers) and the rate doesn’t include a short-term bonus, so I don’t need to keep switching to chase the best rates.
Overall, I’m glad I made the switch to ethical banking products. However, I look forward to a time when consumers don’t have to choose between the best-value option and the most ethical one.
How do you balance returns with ethics? Have you found an ethical provider that also offers great service and competitive rates?