Right on the Money: Green bank accounts and ethical savings

In his monthly column on green and ethical saving and investing, chartered financial planner Tony Fuller of Path Financial looks at where to hold cash savings without compromising your values or funding activities you don’t wish to.

For many of us focused on climate impact and ethical choices, discussions about investing ethically are now common. Another important question is what to do with the cash that you are not investing. 

Whether it’s an emergency fund, short-term savings or cash you simply don’t want to invest yet, where you choose to hold it matters both ethically and practically. Even “risk-free” accounts with mainstream banks may be funding activities that conflict with your climate values.

Why it matters?

Most of the more traditional banks use customer deposits to fund lending and broader financial activity across the economy. That includes corporate lending and underwriting that can support fossil fuels, arms manufacturing, deforestation and other climate-harmful sectors. Even if your savings aren’t technically “invested,” they can still be part of financing the status quo.

For people trying to align their money with their values, that’s a problem — and it’s why ethical cash alternatives have gained attention.

Ethical Bank Rankings

Some useful resources for evaluating the ethical credentials of banks in the UK are independent consumer organisations that research social and environmental practices across sectors. For example, Good with Money and Ethical Consumer score banks across multiple criteria.

Suggestions of ethical banks for savings

• Triodos Bank consistently scores well for both current and savings accounts, scoring highly on transparency, company ethos and climate impact.
• Charity Bank does not offer day-to-day banking services but scores well for its savings accounts, scoring top marks across categories like climate, environmental reporting, worker rights and tax conduct.  It also ranks well for its positive lending practices.
• Challenger banks (Tandem, Starling etc.) are often included and generally score better than traditional high-street banks, largely because they have simpler business models and are not actively financing fossil fuel extraction
• Building Societies (e.g. Ecology, Nationwide etc.) also perform relatively well compared with shareholder-owned banks.  They are mutually owned and are often rewarded in ethical rankings for cleaner tax practices, a focus on member benefit rather than shareholder profit and simpler lending models centred on housing and communities

Their methodologies can include looking at how these companies behave, including whether they avoid fossil fuel finance and their reporting of financed emissions.

Most major high-street banks score poorly in these assessments.  They often fall down because of involvement in funding fossil fuel extraction and opaque tax practices.

Government-backed options: NS&I and Green Bonds

If your priority is financial security, National Savings & Investments (NS&I) remains one of the most secure places for cash in the UK as it is backed by HM Treasury.

• Standard NS&I products (Premium Bonds, fixed savings) are very secure but aren’t marketed as ethical — your money funds general public spending, which you may or may not regard as ethical depending on your views.
• NS&I Green Savings Bonds are an exception to this.  The funds are specifically used for environmental projects like renewable energy, green transport and energy efficiency infrastructure.  This is a low-risk way to support climate outcomes.

These green bonds do not give you instant access, but they can be a compelling option for savers willing to lock money away for a defined term.

Tax-efficient options

By using a cash ISA, the interest you earn is free from income tax.  You can currently pay £20,000 a year into cash ISAs. In the 2026/27 tax year, the government announced that the cash ISA allowance will be reduced to £12,000 for under-65s. You will still be able to pay up to the annual ISA maximum of £20,000 a year into investment ISAs (which invest in stocks and shares rather than low-risk cash deposits), less whatever you choose to put in cash ISAs. So invest £12,000 in a cash ISA in 2026/27 and you’ll also be able to invest up to £8,000 in a Stocks & Shares ISA.

Using a cash ISA and an ethical provider allows you to combine tax efficiency with purposeful savings. 

If you have money in an existing cash ISA then you could consider transferring it to another bank – you should check before doing so that there are no penalties for early access or transfer.

The “prizes” from premium bonds are also tax free so that can be an attractive product for people paying higher rates of income tax if they are happy to accept randomness of returns. 

Putting it all together: purposeful cash savings

Choosing where to hold your cash isn’t just about interest rates or brand familiarity. For individuals serious about climate action, it’s about ensuring that even your “safe” cash isn’t inadvertently funding harm.

Typically, we would suggest avoiding defaulting to mainstream high-street banks whose wider lending practices may conflict with climate goals.

You could consider banks with strong ethical ratings like Triodos and Charity Bank, which explicitly avoid funding harmful sectors and support positive social and environmental outcomes. Building societies, challenger banks and National Savings products are all also viable options.

You should also consider how these fit with your financial planning. You might like to consider accounts that help mitigate your income tax bill. You should also try to manage your accounts so you hold no more than £120,000 with any one banking group (the maximum covered per institution by the Financial Services Compensation Scheme.) 

For many climate-aware savers, this isn’t about sacrificing security — it’s about reclaiming the power of your money at every level, even when it’s sitting in a bank account.