What is Ethical Lending and why do we care?

In life, we are drawn to likeminded people, whether it is two strangers striking up a conversation in a social setting, we want to be with people who share our values, aspirations, needs and concerns.  So why shouldn’t our banking relationships reflect that too?

Lenders are an integral part of our financial system, they facilitate the movement of money around our economy into businesses, households and to individuals. In simplistic terms, we lend our money to them to earn interest and they relend it to others at a higher rate to make a profit.

Not all lenders/banks have the same motivations, some are focussed on making profits for shareholders whereas others are run for the benefits of their members.  Some banks are willing to lend to certain areas of the economy, such as home lending whereas others are not.

Issues arise when banks fund projects that may be financially profitable and benefit shareholders to the detriment of the broader community. Such projects may be unethical, environmentally irresponsible, or socially corrupt. Examples could include lending to facilitate the clearing of old growth forests, expanding coal mines and supporting the cultivation of tobacco to name a few.

Due to increased activism and demand for transparency of a company’s efforts to improve sustainability and its environmental impact, priorities are now shifting amongst lenders in Australia.  They recognise the need to be better corporate citizens (meet corporate social responsibility practices) otherwise they may suffer shareholder activism, reputational damage, loss of customers and decline in revenues/market share.

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).

How do I know if a lender is ethical?

Do ethical loans cost more?