Losing all your money? Hate your bank? Doesn't everyone?

As conventional banks fail left, right, and centre, here is an alternative. Perusing the environment section of the New York Times, I recently came across the term, "ethical bank". Now you may laugh at the oxymoron (ethical? banks? who knew?), but its real, I kid you not.

Ethical banks are simply banks who invest savings in socially responsible projects (e.g. wind farms) to benefit communities and make money simultaneously. So it's basically banks that are much clearer about where your savings are going (i.e. into the real economy) rather than tying it up into bundled investments which MAY eventually see the light of day outside the stock market (which originally I misspelled stick markey...appropriate in its absurdity). According to Simon Birch at The Guardian, ethical banks like the European bank Troidos are doing quite well in the current economic climate because they do not suffer from the hyper-inflation that conventional banking systems are vulnerable to (http://www.guardian.co.uk/money/2008/oct/18/savings-ethicalmoney). There is, of course, a downside to ethical banks: lower interest rates. Since they are a safe and stable investment (for the most part), interest rates remain low, though also stable, which is far more attractive to most clients. Especially when you know your investment will not benefit humans-rights abusers, the environement, etc.

After seeing the term in NYT and after doing a bit of research, I got quite excited and am seriously thinking about moving my savings into one of these banks as part of my growing move towards environmentalism and greater social responsibility.

Its an interesting model because I think its one that would work well in the developing world as well, especially if its combined with microfinance institutions who already know quite a bit about socially responsible finance. You can find out more about ethical banking on Wikipedia (I'm horrified to promote wikipedia as a source since I consistently tell my students that it is not a valid source) or you can check out the following known ethical banks:
--Troidos Bank (Europe)
--Co-operative Bank (UK)
--Wainwright Bank (USA)
--Shore Bank (USA)
--RSF Social Finance (USA)--actually its an investment firm, not a bank per se
--Citizens Bank (Canada)

Of course, like any system, I'm sure this one has its own faults but I think the the benefit of more direct investment as well as the social responsibility aspect make it worth looking at.

P.S. Similar posts have been written about Islamic banking recently: http://www.religiondispatches.org/archive/economy/803/can_islam_save_the_economy