As we know, ethics vary from person to person, that is what is ethical to one person may not be acceptable to another.
Lenders may also be ethical and sustainable but may be deficient in other areas, although there are some exceptions.
At one end of the spectrum, there are companies who may impose unfair or exploitative loan terms and conditions on borrowers, causing financial pain while providing significant benefits to shareholders.
On the other hand, other firms will proactively support the environment and the broader community by running their business on 100% renewal electricity, being carbon neutral, supporting and sponsoring community projects/initiatives and the disadvantaged. They may also provide green loans for green homes, upgrades such as solar, greywater systems, water tanks as well as loans for electric cars.
While there are no definitive standards to deem whether the lender is ethical or not, lenders may work towards and report on their progress towards sustainable, social and the environment aspect of their business, investments, and loans. In determining whether a lender is ethical, we consider:
- What was the underlying reason why the bank was established?
- Do they make political donations or give gifts? Do they allow employees or management the time to support political candidates or political organisations?
- Do they apply their social responsibility exclusions to lending? How is this set, is it at a primary purpose or threshold level? Some exclusions may include (one or more):
- alcohol, armaments, prisons, cryptocurrency, deforestation or gross environmental degradation, gambling, military activities, political activities, pornography/prostitution, slavery, tobacco and uranium
- Do they report on their environment, social and governance (ESG) performance annually?
- Have they achieved or are targeting carbon neutral?
- Do they have sustainable work practices, such as being paperless, energy efficient etc.?
- Do they have relevant memberships or certifications that align with their mission/purpose to support sustainability, the environment and ethical lending practices?
- Do they support environmental roadmap/programs or initiatives, locally or globally?
- Do they provide niche offerings, such as green loans for solar installations, greywater systems, electric cars? Do they provide green home lending discounts?
- How much do they donate to the community or give back to members? Is this material, as a percentage of profits/revenue?
As with all things, Ethical lending is all about getting the balance right for you. When selecting a lender, you need to feel comfortable with the lender’s ethics, purpose and fit, including their products, based on your own priorities.
As there are so many lenders, we can help you navigate the market and select a suitable lender for you.
At FWD Financial, we have more than 35 different lenders on our panel, we can help you navigate this and find a lender that shares your values and supports you, the environment, and the broader community. Either contact us or give us a call on 0410 FWD FWD (0410 393 393).