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Dharma Balaghee

Ethical Lending | Green Home Loans


Whilst many Australians have relatively sound ethical values and aspire to be true to them through their actions, unfortunately, this can often be difficult to do at an individual level. One thing we can consider, however, is how our money is being used within businesses and industries and subsequently whether those companies align with our values.

Green Economy  and Sustainable Development

When it comes to home loans and finance, one way we can do this is by choosing a lender that
demonstrates operating in an ethical manner and one that doesn’t compromise moral standards for
profits. An ethical lender is typically defined as a bank or lender who has certain standards in terms of what types of businesses they invest in, who they lend money to, and what causes they support. For example, a bank may choose to actively invest in a community housing project or lend to businesses in the renewable energy industry and stay away from organisations involved in mining, weapons, tobacco, slavery and so on.

When you don’t consciously choose an ethical lender, you may be inadvertently supporting industries or businesses whose activities are questionable at best and potentially destructive. Banks invest the money they make from your savings account and the interest you pay on your loan towards businesses and projects of their choosing, so when your values align with your bank’s, you indirectly have a say where your money goes.

How can we classify what is ethical and what isn’t?

Everyone’s definition of what’s ethical is slightly different. Broadly speaking, however, ethical companies strive to create positive change in the world and are actively working toward this goal, even if there is a cost to their bottom line. For example, an ethical company may only use electric vehicles or pay factory workers a fair wage even if they aren’t legally obliged to.
According to Ethical Consumer, a not-for-profit organisation in the UK, we can determine how ethical a business is by assessing it across the following key categories – environment, people, human rights, animal rights and politics.

Ethical companies should have clearly defined high standards and policies in terms of their
environmental impact, how they produce goods, who they employ, who they work with and who they give money to. They typically also provide transparent reports on their activities and compliance with these policies. They are not involved in industries that are damaging to people, animals or the
environment or operate in oppressive regimes where human rights abuse is common.

How can you find an ethical lender?
Finding an ethical lender may require a little thought and research on your part. Start by deciding what issues are important to you, as this will help us find a lender who shares your values. Look at the bank’s policies on who they will and won’t lend to and check what types of projects they have been funding.

What is a green loan?

Although sometimes confused with ethical lending, green loans are different. A green loan is when you borrow money to finance a project or purchase that is environmentally friendly. It is most often used for home improvements such as installing solar panels or water tanks. Additionally, some lenders are now offering green home loans, which may be a great option if you are
buying, building or renovating a property that is particularly environmentally friendly. You can also apply for a green car loan to purchase an electric or hybrid car.

What are the benefits of green loans?
Green loans have a host of advantages and very few disadvantages. Aside from knowing you are doing your part in making a positive difference to the world, you could benefit from potential long-term cost savings, depending on the scale of your project.
There are also several major financial benefits. Green loans often have lower rates than the equivalent (non-green) loans and you may also qualify for cash backs, rebates and a higher Loan to Value Ratio.

Switching to an ethical lender
Once you know if your existing lender’s ethical focus aligns with yours, you may find you want to switch lenders. We can arrange most of the administration involved in refinancing and guide you through the process. We will also help you factor in your own financial needs by taking into consideration how much the lender will lend you, their interest rates and if they offer loan features that will suit you. Whether it helps you sleep at night, or just allows you to feel like you’re part of something bigger, an ethical lender or green loan product could be an option for you to consider for your next loan.

United Nations Sustainable Development Goals (17 x SDGs)


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