Finding a home loan from an ethical bank
If you want the biggest loan you’ll ever get to be from an ethical lender, you'll have to do some research. We'll show you where to start.
Australians are becoming increasingly concerned about how banks, lenders and investment funds use their money. Nine out of ten Australians want their superannuation to be invested ethically, and responsible investments totalled $622 billion in 2017.
When it comes to home loans, most people go straight to the interest rate as the deciding factor. But you can be ethical with your choice of mortgage lender and still get a good deal.
How do you measure an ethical bank?
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
By avoiding investments in these industries, it is argued, banks and lenders are doing good by refusing to fund things that have harmful consequences in the short and long terms.
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?
"Ethical" remains a hard-to-define concept, and will depend in part on your own definition of the term. With that in mind, here are some options that can help you narrow down your search.
Community and customer-owned banks
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. And they 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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