Your pension pollutes more than planes — here's how to make your money do good
You recycle your yoghurt cartons, watch your carbon footprint and always choose the 'green' supermarket delivery slot, but you may be ignoring one of the biggest ways you can make a positive environmental difference; the money that you invest and put into your bank account.
Figures from Make My Money Matter, an ethical finance group backed by filmmaker Richard Curtis, show that changing just one product – your pension – reduces your carbon footprint 21 times more than if you gave up flying, went vegetarian and switched your energy provider to a greener version.
'Consumers are waking up to the power their money has,' says David Macdonald, ethical financial planner at Path Financial.
'In much the same way that people now won't buy products from companies with exploitative supply-chains or won't tolerate their friends drink-driving, attitudes with money are changing too.'
There are many ways you can use your money to make the world a better place without sacrificing convenience or financial performance. Here are 10 of them, big and small.
The smallest green change needs only a single click and proves that every little helps. Almost every bank offers you the choice of paper or 'paperless' bank statements, and by going paperless you are making an environmental difference.
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High street bank NatWest calculates that by moving from a paper bank statement to a digital one, you save the same amount of greenhouse gas emissions as are generated by charging your smartphone five times a month, so it's worth clicking that box.
Where you do your day-to-day banking really matters, says Lori Campbell, from ethical finance site Good With Money.
Check where they invest your savings, so that your salary is not helping to fund environmentally harmful practices.
It can benefit your pocket as well as the planet: at the moment, Nationwide, which is rated highly by Good With Money, is offering £200 to switch through the current account switching service, and the mutual also pays out £100 Fairer Share bonuses to eligible members each year, with the latest batch hitting accounts from this month.
If you have a workplace pension, chances are it is invested in whichever fund is the default for your company. But you may have a more ethical option available that you aren't aware of, and it can be easy to switch.
The fund that your pension is in should be on your annual statement. You can check how it is invested and if you aren't happy with it, ask your workplace provider if it has a 'green', 'responsible' or 'ethical' option.
If it does, check what it invests in and whether you're happy with performance, and if you are, you can ask to switch all or a proportion of your fund.
Many of us want our savings and investments to be more sustainable but are bewildered by the many funds and products out there, that promise to be 'green' or 'environmental' (and don't always live up to expectations).
Lori, at Good With Money, says this is 'greenwashing' – a marketing technique where a provider or product appears to be more eco-friendly than it is. If your pension or Isa is invested in funds, you can check whether it lives up to green credentials by looking at the companies it holds in its fund.
Some that are badged as 'green' simply screen out certain types of companies – for example those involved in fossil fuels or tobacco – while others screen positively for companies that are trying to make an active difference.
As well as buying funds with good outcomes, you can divest those you aren't happy with in terms of their ethical actions.
David, at Path Financial, says that if you're swapping out shares in companies you are not happy with, you are making some difference – but you must also consider what to buy instead.
He suggests replacing any shares for which you aren't happy with the ethics of with funds that attempt to be actively good.
'One example is the Columbia Threadneedle UK Social Bond fund,' David says. 'With this, the £1 you have just made by selling your 'bad actor' can go into a new housing unit for a vulnerable person.'
This fund's bonds include money lent to affordable healthcare companies as well as social housing in various countries.
'Such investments have a direct impact and a serious social purpose,' David adds – and the fund also yields over 4%.
Is your pension provider or fund manager making a difference?
David recommends choosing companies that will advocate for the change you want to see.
Those running funds or pensions get a vote on the activities of the companies they're investing in. And he notes that while most do not take it seriously, some do.
'I'd look at the stewardship aspect of whoever is running your pension or the fund it invests in,' he says. 'Do they use their vote to influence companies for the change you want to see? I'd recommend using a financial adviser or fund manager who expressly goes to company annual general meetings and presses for better behaviour from companies.'
Alternatively, buy the shares yourself. After all, you only need to own one share to have a right to attend meetings. This could be via a self-select Isa or Sipp (self-invested personal pension). That's real shareholder action!
Rather than putting your savings with a giant high-street bank, help your local area or those otherwise connected with you by depositing them with a credit union.
These organisations help people to access affordable credit and can offer attractive savings rates, too.
Figures from financial services consultancy Broadstone, out this month, show that they are more popular than ever, with more than two million members across the country.
Richard Pinch, senior director at Broadstone, believes they are one of the finance world's 'best-kept secrets', adding: 'Another bonus of credit unions is that they offer attractive rates to savers, who also benefit from the knowledge that their deposits are helping to provide loans for other members.'
Investing your money at an early stage into small projects can help you to make a difference and get a return.
Ethical bank Triodos offers several investments, some of which can be put into an innovative finance Isa (Ifisa) to gain tax relief. Alternatively, David at Path recommends using One Planet Capital to invest in green start-ups that are investing in environmental challenges.
The One Planet Capital schemes include a significant amount of tax relief as they are either an Enterprise Investment Scheme (EIS) or Seed Enterprise Investment Scheme (SEIS). More Trending
However, these are risky investments and you may not get your money back, so are only suitable for expert investors.
As well as greening your own affair, you can speak to others about the environmental impact of financial decisions.
You can find resources on this on the Make My Money Matter website and a list of companies on the Good With Money website that hold a Good Egg award for ethical finance.
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None of this means, of course, that you can forget about those yoghurt cartons…
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Get in touch by emailing MetroLifestyleTeam@Metro.co.uk.
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