A Guide to Ethical Banking

(Advertisement with GLS Bank – this blogpost is also available in German / auf Deutsch)

Did you know that financial institutions may use your money to finance weapons manufacturers, child labor and pollution? While we believe that banks always have our best interests in mind, they unfortunately contribute to global issues by supporting controversial companies. For example, banks around the world are still pumping billions into coal companies, although they are proven to destroy our climate (Source: Facing Finance).

However, I don’t really think that you want to invest your money into controversial business practices and climate issues. At least I don’t want it to. A truly sustainable lifestyle requires a switch to a socially and ecologically conscious bank. I have to admit that until recently I did not think much about “What happens with the money on my account?”

But it’s a very important topic and I am very pleased that I have such a competent and sustainable collaboration partner for this blog post: GLS Bank!

A few facts about GLS Bank:

The GLS Gemeinschaftsbank eG (the acronym GLS stands for “Community Bank for Lending and Giftgiving – Leihen und Schenken”), the world’s first universal bank with a socio-ecological focus, has been operating for nearly 45 years. It is also the only bank that publishes all loans granted to business customers. This makes it clear to everyone that the funds invested will be invested in meaningful and sustainable projects. The loans are regularly published publicly. You can also read here online about what the money is used for (in German, find the English company portrait here)!

Investments and financing exclude nuclear energy, biocides, organochlorine mass production, violation of labor and human rights, embryo research, genetic engineering, child labor, controversial economic practices and environmental behavior, pornography, producers and traders of high-percentage alcoholic beverages, armor, tobacco production and animal testing. The business policy strictly excludes speculative business.

When I do a cooperation I try to get you involved and to make the whole thing more interactive. So I asked a few questions about Ethical Banking in advance on Instagram Stories. This way I can try to directly incorporate your interests into my articles!

My questions to you were whether you know if your bank is an ethical bank and what exactly you would like to know about ethical banking.

Screenshots from my Instagram account

To answer your questions, I turned to Werner Landwehr, Regional Director of GLS Bank Berlin, who was able to provide me with detailed information. Since our conversation was really exciting and I learned a lot, I wrote the whole thing up as an interview. Here, all your questions will be answered (Note: The interview has been adapted and shortened for better readability). I divided the interview into two parts. In the first part, we discuss the topic of “Ethical Banking” in general and in the second part, there is information specifically about GLS Bank and what makes it so special. At the bottom of the blogpost you also find a link to other ethical banks worldwide!

Part 1: Ethical Banking in general

Mia, Heylilahey: Over 70% of my followers have stated that they have no idea if their bank is fair or eco, how can that be?

Werner Landwehr, GLS Bank: The topic is just not that big. Actually, which bank you are a member of should be a topic of small talk. Like “Where do you go shopping?” – but no one does that. People speak very little in private about money issues and no one asks about it. It’s just not a normal conversation. And, in a way, it’s also a bit of consumer convenience, which gives you excuses for not getting really involved with fair banking. It’s also the case with people who already think intensively about sustainability.

Heylilahey: Ethical Banking – What is a Social-Ecological Bank? What makes a bank an ethical bank or environmental bank?

Werner Landwehr, GLS Bank: A bank becomes a “social-ecological bank” if it uses its funds appropriately and invests primarily or exclusively in companies that approach environmental issues responsibly. For example, in renewable energies, sustainable living, etc… In doing so, the bank is open and transparent about its investments.

Heylilahey: Can a single customer actually change something with the choice of the right bank?

WL: That’s actually the core message of GLS Bank: just like I, as a critical consumer, ask “Where exactly does my electricity come from?” And “Where and how is my clothing produced?”, We can also have a say in the financial sector as to what kind of economy we support. It doesn’t matter if that is with a lot or little of money, or a checking or credit account. Each person determines the conditions of the world in which we live by the way he or she deals with their money.

Heylilahey: How do you find out if your bank is a social-ecological bank? Where do you find out how and where to invest? How do you find out what your money is used for?

WL: In fact, I always encourage all people to ask employees at the bank, “What exactly do you do with my money as a bank? Where will this be invested, etc.? “99% of the cases will be answered: “I can not tell you that, I do not know that, or this is a banking secret, we can not talk about that.”

(Note by me: that already says a lot about what the banks are doing…).

On the other hand, there are organizations such as Facing Finance, which regularly examine the German banking market, in particular investments in weapons companies. The organization classifies the banks by the extent to which they are involved in the defense industry. The same is true for coal investments or speculation in food, or similar.

(Note by me: You will find the Fair Finance Guide, which provides exactly this information, here (in German), and the international page here)

Heylilahey: How can one find information about social-ecological banks?

WL: The Fair Finance Guide is a very good source. But there are not so many fair and ecological banks so that makes it easy to get an overview very quickly. In Germany, Triodos Bank, the Umweltbank and the GLS Bank are the banks active in the strict sense. Add to that the Ethikbank, which is part of a normal Volksbank. Then there are banks such as the Bank for Social Economy, or church banks, which are slowly thinking more about “Ethical Banking”. Because I can not preach on Sunday for peace and invest in weapons on Monday.

At the same time, large banks are also realizing that in the foundation sector, as well as in pensions plan s, the question “What exactly is being done with my money?” is becoming more and more important. The awareness of the connection between our invested money and the world we live in is increasing.

Heylilahey: Is there also greenwashing in the area of fair banking? How can one uncover that as a customer?

WL: “Greenwashing” also happens at banks. Just because we talk about the topics of sustainability and ecological-consciousness does not automatically change the business idea of institutions and companies. The basic idea of sustainable business management should not come from a marketing point, but must be anchored in the core of the company. Everything else, if you look at it reasonably, is simply “stupid”. Destroying the world is an incredibly stupid idea.

But basically, I’m a bit reluctant to completely condemn Greenwashing, because a little bit of progress means that people are at least thinking a little bit more about fair banking. But it is problematic, however, if under the guise of “green” products are brought to people that are very very light green, or have no sustainable focus at all.

Heylilahey: Is there something like certificates for fair banks?

WL: Unfortunately, there are not really reliable certificates. The term ethical, green or sustainable banking is not a protected term. It is unfortunately still a long way until we have at least halfway reliable certificates, such as in the food or clothing industry. But it must come and all consumer organizations are also demanding this. At the same time, you should always remain critical about certificates and always view them only as a guide.

Heylilahey: What are non-ethical banks doing differently?

WL: Straight to the topic of fairness: if I my goal is to get as much money as possible from my client then this is actually already an unfair practice. When in fact, my aim should be to consider, and find out what my client wants and what is important to them. That way I can build a comprehensive picture of the person and with my expertise I can figure out optimal offer for that client, completely free of how much this benefits my bank. In fact, however, in reality it often looks as if the counselors are explicitly given instructions on how many bank products should be sold per month.

Heylilahey: How can I invest my money sustainably?

WL: By investing, for example in wind turbines, or in a farm, it is important to correctly assess the associated risk. On the other hand, if I invest the money with a bank, then this is connected with the statutory asset protection. In this case, there are the added institutional backups that will guarantee that my money is protected, and that takes out the risk for me. But there are only a few, like the GLS Bank, who at the same time guarantee a sustainable use of the money. But if you are willing to take the risk, then you can invest directly.

Part 2: Questions regarding the GLS Bank:

Heylilahey: What is the business principle of GLS Bank?

WL: The basic principle of GLS Bank is to actively communicate to people what we do with their money. Because we say that what is usually at the center, security, liquidity and return, are relevant, but ultimately, when you look at the world and how it is today, these points are totally secondary. The focus of attention must really be on sustainability.

This transparency is not only the opposite of typical banking secrecy, but a requirement so those who want to be sustainable with their money have a chance to do so.

Heylilahey: Where does GLS invest and where does it not?

WL: The GLS Bank finances more than 11,000 companies and projects each year in the fields of renewable energies, sustainable construction and life, but also topics such as free schools and kindergartens and facilities for the disabled. It does not invest in, among other things, alcohol, nuclear energy, genetic engineering, weapons, tobacco, child labor, animal experiments, and embryo research (Note by me: more infos on that here).

Heylilahey: How does GLS Bank support climate protection?

WL: In general with all financing in the field of renewable energies, as well as by building insulation technology and electromobility. Specifically, the bank is also a founding member of the Association for a national carbon tax.

(Note by me: The CO2 Abgabe e.V. proposes a climate tax – CO2 tax, CO2 price, minimum price of CO2 – on fossil fuels, ie coal, oil and natural gas. This incentive tax should ensure efficient climate protection, link)

This should cause the real “cost” of an energy because all associated impacts are taken into account when calculating the price. Using this tax non-renewable energies are explicitly and extremely much more expensive. The real environmental costs of generating energy should not be paid by the community, but should be reflected directly in the cost of the product. We are not only a member of CO2 Abgabe e.V., but also organize events together on this topic in order to raise awareness of this idea.

Heylilahey: So a sustainable lifestyle also needs an ethical bank?

WL: Of course, and in principle in two ways: for example, organic food is not just about buying an organic apple because it’s healthier and it’s good for us, but also because we’re making a difference in our society by choosing more sustainable foods. So we are not only doing something for ourselves, but also for the community. A bank change is not just because you want to be in a fair bank with fair advice, but also because it drives a positive social impact.

Heylilahey: How do you switch to GLS Bank?

WL: That’s very easy. We also created a video for that. In fact, it is important to us that, if possible, the account change is done completely online. Even the identification process works with video ident. The basic idea is that the relatively complicated process of opening an account should be easier. Even your scheduled regular transfer orders can be automatically transferred to the new bank account through the online account change service (more infos about the switch here).

Heylilahey: Are there any disadvantages to switching to GLS Bank? What else is different with respect to account management?

WL: It always depends on what you personally consider a disadvantage. For many it is a disadvantage if it costs a little more. But that is relative. The costs are comparable to other banks. However, we deliberately and explicitly add the so-called Bank contribution on top. We see it like this: The Bank makes a significant contribution to social and political change. GLS wants to continue to do that in the future. And these are not always activities that lead directly to returns, but actually often cause additional costs. For this we need a clear vote and also financial support by the community and that comes from this GLS contribution. From the age of 28, this is 60 euros per year. However, there are also discounts, depending on income. The reduced fee is only 12 Euros per year.

Some also complain that there are not enough GLS branches, but nowadays most people do not go in to a bank. Actually you can fix all things online or on the phone. By the way, cash can be withdrawn with the GLS Bank Card at more than 19,000 ATMs of the Volksbanks and Raiffeisenbanks nationwide. For our members, there is also the member account, where four withdrawals per month are possible at other banks free of charge, as well as with the credit card worldwide free of charge. Otherwise, in my opinion, you have no disadvantages with an account at the GLS Bank, and if you notice any disadvantages, then you should tell us and we are also happy to receive suggestions on how we can change.

Heylilahey: What is this membership that you just mentioned?

WL: The GLS is a cooperative and cooperatives collect on cooperative equity. Often, the equity for banks comes from investments in the stock market. For cooperative banks, this comes from cooperative shares. With the purchase of cooperative shares you become a member. So as a member you are co-owner of the bank. The money is invested at the bank. Our members actively participate in the development of the bank through their voting rights at the Annual General Meeting. Due to the approximately 50,000 members of the bank, the GLS is also unsellable and independent. The members would never agree to the sale.

Heylilahey: What about traveling with a GLS Bank account?

WL: With the member account, the withdrawal of cash worldwide is free of charge with the credit card, otherwise the withdrawal fee will be charged according to the fee of the respective institution.

Heylilahey: Do sustainable mutual funds exist?

WL: They exist. Our mutual fund is one that also reports on how the fund deals with the issue of sustainability. But independent of the GLS Bank, there are special, sustainable equity funds at other banks, but at most banks this usually makes up only a part of the portfolio.

But that’s not just because banks or investment companies are not willing to invest sustainably, it’s mainly because finding such sustainable investment locations is so difficult.

Heylilahey: Are there any additions from you, answers to questions that I have not asked?

WL: Regarding the younger target group of your channels: We have developed something that ties in with social media. This is the Futopolis network and it is currently being gradually expanded and rolled out. In the first phase only for GLS Bank customers. Our data is becoming more and more a currency that is used in parallel to the monetary currency business – and in a very general way, despite new privacy policies & regulations. And this also brings up an important question: Can we handle the data in a more fair and more sustainable way? Not only to protect us, but also to raise awareness about dealing with data in a fair way.

Link to Futopolis: https://futopolis.gls.de/

Thank you for the interview!

My thoughts?

You know that even when a post is a collaboration my conclusion are always very honest. I was paid to prepare the interview, but my opinion and conclusion remain 100 percent unaffected and unedited. After all my research and this detailed interview, I’m sure – a sustainable lifestyle needs an ethical bank account. And to be completely honest with you: I am currently at a bank that is by no means sustainable or fair. Somehow the topic was always very low on my priority list. But I’ve decided to make the change, at least for my private account (all about the account change service from GLS Bank here). But I think that this could be interesting, useful and exciting for you. I can directly test how easy the change really is, whether there are any specific advantages or disadvantages and how the service is. So in the next blogpost on the topic, I will give a review on my account change, as well as the topic of eco-fashion and eco-banking. So stay tuned 🙂

You also wanted to know which bank is particularly suitable for students. Check out the GLS Bank page for their young account!

Now my questions to you:

Are you already at a social-ecological bank? If yes, which one? If not, do you intend to change in the near future? Do you have any more questions or comments about ethical banking?

More about GLS Bank here and about the GLS account switch here! 

For my readers outside of Germany: The GLS Bank is also a founding member of the Global Alliance for Banking on Values (GABV), a network that has set itself the goal of making the banking business more sustainable and fair. You can find other banks that support ethical and sustainable practices in this list – makes it easier to do your research on ethical banks!

In addition, the GLS Bank also lives internally according to their social-ecological principles, participates in campaigns and current political issues, such as the current topic of the Hambacher forest, for example, with social media postings, participation in the demonstrations on site and takes action for the coal stop. Click here for Instagram and here to the Facebook channel of GLS Bank!

View this post on Instagram

50.000 Menschen haben am Samstag friedlich für den erhalt des Hambacher Wald und gegen Braunkohle demonstriert. #hambibleibt #sharedichdrum #stopkohle

A post shared by GLS Bank (@glsbank) on Oct 8, 2018 at 1:52am PDT