As we move towards a more sustainable and ethical society in which to raise our families, many consumers are becoming increasingly conscious of how their financial choices can have an impact on the market for products that promote this.
A recent report by consulting firm PwC indicated that “more than 60% of people are basing their purchasing behaviours on sustainability and ethical criteria – and this is growing by 10% each year”.
Given that a home is likely to be the biggest purchase many of us will make in our lifetime, should we be expecting the organisations who lend us the money for it to have ethical practices? And are they offering products that meet these lofty expectations?
What is Ethical?
Determining whether a lender can be considered ethically and environmentally friendly can be complex, as there are many factors to consider.
Although an organisation’s stance on climate change and the environment are an obvious starting point, consumers should also their overall business practices, including things like its lending policies, investment decisions, and fee structures.
Analysing any programs that promote sustainability or help their customers become more eco-friendly are also important.
It’s a lot to take into account, and although many Australians may have a preference for ethical lending practices, finding the time to do the research is the tricky part.
Follow the money
One good indicator when considering whether a lender has sound environmental and ethical principles is to consider where fund managers such as Australian Ethical Investment (AEF) choose to put their customer’s money.
Stocks in the AEF’s A$6n portfolio must meet the requirements of the company’s Ethical Charter, which steers the fund into parts of the economy that are good for the planet, people (and animals!), and away from potentially harmful sectors.
In the lending space, the AEF has taken stakes in lenders such as National Australia Bank Westpac, Bank of Queensland, Bendigo Bank and Adelaide Bank according to a report in July this year.
This list is not exhaustive by any means, and even those named above aren’t perfect – a study by Market Forces recently showed that all of Australia’s big four banks have funded fossil fuel projects in recent years for instance – but it’s a good indicator that they are on the right track.
Other lenders, like Commonwealth Bank for example, have started offering ‘Green Home Loans’ that offer discounted mortgage rates if you build, buy or renovate your home to be more sustainable, climate resilient and energy efficient.
This initiative has been taken up by several of the smaller banks in recent years, so don’t be afraid to ask your lender (or broker) if they offer such a product.
Spreading the net
Another way of making sure you are covering the market effectively in your search for such a product is to engage a third-party broker, who can help you spread the net further and save you valuable time.
Most reputable mortgage brokers will have direct relationships with multiple lenders and, as such, are more likely to have an informed view on which of these organisations offer ethical lending products.
They’ll also be able to advise you how competing home loans stack up against each other, both ethically and financially.
However, if you are determined to canvass the market yourself, we’d recommend you ask your lender about their record in the following areas:
- Investing in social projects, such as affordable housing and renewable energy
- Having a low carbon footprint
- Immersing themselves in local communities and charities
- Possessing a corporate culture free from scandals
The rise of ethical lending seems set to continue as climate change becomes a reality and sustainability is ingrained into our lives.
Choosing your home loan wisely could not only save you thousands in the long-term, but could also be your contribution to a more sustainable planet for everyone..
Loanscope work with over 30+ lenders and have extensive experience in navigating the ethical lending market. Our knowledgeable team would be happy to guide you through this – contact us here for an obligation free discussion.
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