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Ethical home loans
If you want an ethical home loan from a lender that avoids investing in harmful industries, you do have options.
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Australians are becoming increasingly concerned about how banks, lenders and investment funds use their money. With a bit of research, you can get an ethical home loan from a lender that doesn't invest in fossil fuels or unethical industries. And you still get a good deal on your mortgage, too.
How do I measure an ethical bank?
"Ethical" remains a hard-to-define concept, and will depend in part on your own definition of the term.
Generally, ethical financial institutions are ones that avoid investing in a variety of harmful industries, including:
- Coal, fossil fuels and environmentally unsustainable industries.
- Weapons and war.
- Human trafficking or exploitative companies.
- Businesses involved in animal cruelty.
Of course, ethical behaviour goes further than that. The mortgage and finance industry has had a storied history of poor practices, prompting the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry to launch back in 2017.
And globally, the industry has a poor reputation for doing the right thing by customers. In fact, according to a study by BrokerChooser, the mortgage industry globally has copped billions of dollars' worth of fines over the last 20 years.
They report that 83 major fines were handed out for offences within the mortgage sector that added up to over $56 billion – meaning that each fine was worth an average of over $680 million.
How do I find an ethical bank?
While it's not quite possible to measure a bank or lender's ethics or integrity, there are several organisations that can help you determine whether a lender is funding unethical industries:
- Market Forces. This is an activist organisation that runs campaigns to get businesses to behave more ethically. It maintains a comparison table of various banks and lenders and the amounts they have invested in the fossil fuel industry.
- Responsible Investment Association Australasia. This body is one of the leading groups pushing for responsible, ethical and sustainable investments in Australia. Its annual benchmark reports provide a comprehensive overview of the ethical banking landscape.
What are my ethical home loan options?
If a focus on ethical practices is important to you, here are some options that can help you narrow down your search.
The big banks are ultimately owned by their shareholders, not their customers, but there are many Australian banks that are customer-owned. These institutions are generally credit unions, mutuals and building societies.
Because they're answerable to their customers and not to shareholders, these banks often provide better customer service. They also tend to give more of their profits to charitable causes and are less likely to invest in the fossil fuel industry.
Examples of customer-owned banks with strong ethical commitments include:
- Bank Australia. This customer-owned bank has a strong focus on responsible lending. Bank Australia also refuses to lend to the fossil fuel industry.
- Teachers Mutual Bank. This community lender has had strong ratings from Ethisphere's World's Most Ethical Companies awards. All Teachers Mutual Bank mortgages are certified responsible investment products by the Responsible Investment Association Australasia (RIAA).
- Community First. A member-owned institution with a commitment to "help create better and more sustainable communities" wherever they operate.
You can learn more about customer-owned banks and find specific institutions on the Customer Owned Banking Association website.
Corporate social responsibility
While not all institutions meet the standard definition of an ethical lender, most banks have some kind of corporate social responsibility (CSR) initiative.
A growing trend in large corporations, CSR involves companies giving back to the wider community through donations, services and specific programs designed to help people in need, or environmental causes.
It's worth checking out a lender's CSR policies to see if they align with causes or interests you're passionate about.
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