Fundamentally, banks are financial institutions that are established to handle the financial issues of the people of the society where they are situated. The issue of morality is a distant issue, which has not been associated with financial trends. But, due to the changing societal and environmental demands, the issue of ethics was given a chance looking at the impact of such issues like banking lending policies and other banking problems. The idea of ethics in banking was highly contested by different arms of the society, ranging from NGOs to governmental bodies. This is in fact to give a human face to the banking venture, going beyond conventional business management.

Ethical banks, which can also be identified as a social, alternative, civic or sustainable bank, is a bank that is concerned with the social and environmental impact of its investments and loans. They are financial institutions that are part of a larger societal movement toward a concrete social and environmental maturity in the financial sphere. This aspect has not fully maximized its objectives due to its link to the traditional banking system. This is because the prevalent ones are run by the same authorities in the rational banking sector, and as such abide by the same rules of their former orientation. The stark difference between these ethical banks and their traditional counterpart is their emphasis on transparency and social or environmental aim on any project they undertake. They are not profit oriented and sometimes work with narrow profit margins than the traditional ones. They are known to be very few in number, and mostly operate by phone, internet, or mail.

The Ethical banks also offer various initiative schemes that are geared towards bettering the lot of the people in the community wherever they are situated directing their help to the standard of living in developing or the so-called third world countries. For example, the Cooperative bank in the UK offers its customers a free Home Energy Rating on all house purchases, which enables them to better understand how energy efficient a property is, and how to make improvements. Also, all of the bank’s mortgages include carbon-offset features. As every year that a customer holds a mortgage, the banks make up for a fifth of the carbon dioxide emissions that result form household energy consumption. The profit made from such schemes as this has been used for reforestation in Uganda, for the training of people to build energy efficient stoves in Bangladesh, and a micro-hydro electricity generation in Bulgaria. Such profits revenue from ethical banks has also been used for peoples’ welfare projects in Canada.

This arm of financial institution is also known to excel in community development. They do this by offering such welfare projects like, affordable housing projects, training of people to increase financial literacy, giving local scholarship and sponsorships, and also support community events and projects.

The leading ethical banks in the world today includes: Triodos Bank, which can be located in the Netherlands and also in UK, Belgium and Spain, Co-operative Bank in the UK, Reliance Bank in the UK, Shore Bank in the USA, and some others.