Building Societies have dominated the top of Which?’s list of financial institutions for environmentally conscious savers, which was released during the past week. The not-for-profit consumer research group found that 28% of members said they care about the values of the companies they invested their savings in.
However, more than 69% of Which?’s members said they would not know how to find information about a bank’s green credentials.
Which? asked experts at Ethical Consumer (magazine) to rank eighteen banks and building societies, as a sample, based on publicly available information across four categories: environmental reporting, carbon management and reporting, transparency and ethos.
Top of the list was Triodos, an ethical bank based in the Netherlands with branches in the United Kingdom. The bank focuses on sustainable financial products that work to bring about positive social, environmental and cultural change. They lend specifically to businesses that are making a positive impact.
Behind Triodos, in joint second are Nationwide and Ecology, followed by Leeds and Skipton building societies. Banks such as Lloyds, HSBC and Santander came in further down the list. There was an 81-point gap between the top and bottom-rated providers, showing that savers could significantly reduce their environmental impact by switching institutions.
The providers at the top of the list did better in showing where a saver’s money goes and acted on policies to reduce the money’s environmental impact. Being mutually owned is a great advantage of building societies, as members have control of business decisions.
Both Ecology and Nationwide report the carbon emissions of all properties they finance and can work with customers to reduce emissions. Ecology Building Society uses standards established by the Partnership for Carbon Accounting Financials (PCAF) to calculate its residential lending carbon footprint. In 2020 the result was 1,785 attributed C02 tonnes.
Skipton Building Society commented on their ranking, “As a 168-year-old mutual, sustainable practice is rooted in Skipton’s purpose. Every decision we make is for the long-term best interest of our membership, not shareholders. But more recently our duty to sustainability has also evolved, looking beyond how we serve our members to how we sustainably serve society.”
Building Societies must also hold at least 75 per cent of their assets in loans fully secured on residential property, whereas Banks do not have outright bans or boundaries when it comes to investing in unsustainable products such as fossil fuels. Although banks did well in reporting their environmental impact, building societies have an advantage due to their infrastructures and regulations, which don’t allow for them to invest in large amounts of unsustainable products.
Understandably, customers may be faced with a difficult decision, a sustainable savings account versus interest rates. Turns out, the more sustainable providers were not necessarily at the bottom of Which?’s list of rates; there were similar offerings, regardless of whether an institution offered sustainable products or not.
Not only are building societies leading the way when it comes to ethical, transparent and more sustainable financial products, but they also focus their efforts on improving the circumstances within their communities. In the last week, Nationwide has come together with leaders from other industries to demand a national retrofit strategy to slash emissions from Britain’s 29 million homes, which were last year responsible for more than one-fifth of the UK’s carbon dioxide releases.
Technologies can help to achieve further transparency and simplify processes when it comes to sustainable financial products. Open banking can improve the quality of data to provide more accurate information quickly. Digital features such as instant messaging, push notifications and digital platforms can also enable consistent engagement with customers, notifying them of any updates on greener products and services. ID verification and electronic signatures streamline processes and building societies are also working with fintechs to simplify home-buying for customers.
We will continue the discussion around green banking and digital transformation at FTT Building Societies on 6 October.
Jess Mager, Product & Growth Manager, VC Innovations
