Lots of people have started 2021 with the aim of making green lifestyle changes such as going vegan or giving up flying. But arguably the most powerful environmental changes you can make as an individual involve your finances, whether it’s the cash in your current account or the money you are saving for retirement.
Research issued this week by the ethical bank Triodos found that almost 20 million Britons plan to do their bit to live a greener lifestyle this year. But it added: “Few recognise the impact that switching their finances to greener suppliers can have.”
In part, that is because of the scale of the sums of money involved. For example, there is an estimated £3tn invested in UK pensions, and Richard Curtis’s Make My Money Matter campaign claims that moving your retirement savings to sustainable funds “can be 27 times as effective at reducing your carbon footprint than eating less meat, using public transport, reducing water use and flying less combined”.
The good news for anyone who wants to make a difference is that there are lots of green and ethical options out there.
Current accounts
This is a good place to start for those looking to make a positive change.
If you want to be sure your money isn’t financing fossil fuels or other controversial industries, you may want to consider moving to a bank such as Triodos, which “only lends to organisations that positively affect people’s lives, protect the planet or build strong communities”.
The Triodos current account can be operated online and via an app, comes with an eco-friendly contactless debit Mastercard (it is made from a plastic substitute derived from renewable sources) and offers an overdraft of up to £2,000. But a stumbling block for some will be the £3 monthly account fee, or the fact that Triodos doesn’t have any high street branches.
Triodos is highly rated by Ethical Consumer, an independent, not-for-profit co-operative that reviews companies and products.
According to Ethical Consumer, Barclays, HSBC, Lloyds Banking Group, NatWest, Santander and the TSB owner, Sabadell, are among the big names that continue to provide finance for, or invest in, fossil fuel companies.
It adds that of the high street banks, the Co-operative Bank is the only one that has expressly prohibited support for fossil fuels. The Co-op Bank is famous for its customer-led ethical policy but some will be uneasy about the fact that it is majority-owned by a group of US hedge funds and fund managers.
Some will favour a building society because they are owned by members, not shareholders, and have a strong tradition of helping people to buy their own home.
Becky and Roy Francomb, aged 55 and 61 respectively, recently decided they wanted to move their bank accounts to somewhere more ethical. They were both with NatWest but were unhappy about its financial links with fossil fuel companies. They considered Triodos but ended up plumping for Nationwide building society because there is a branch in Seaford in East Sussex, where they live.
Savings
Much of the above also applies to savings accounts – however, you will find there is a lot more choice. There are dozens of building societies to pick between, including the Ecology, which has a focus on sustainable living, currently offers easy access, cash Isa and regular savings accounts paying 0.2%, 0.45% and 1.1% respectively.
Meanwhile, Triodos has a range of accounts including a one-year fixed-rate savings bond paying 0.4% and a junior cash Isa (for those saving for a child) currently paying 1.5%.
Charity Bank lends to charities and social enterprises and has notice accounts paying up to 0.5%, and fixed-rate bonds paying up to 0.75%.
There are also scores of credit unions. To find ones that may suit you, go to findyourcreditunion.co.uk.
NS&I (aka National Savings) has been slashing rates lately but may still appeal to some because its mission is “providing cost-effective financing for government and the public good”.
Pensions
Campaigners argue that a good chunk of the money invested in UK pensions supports industries that are harming people and the planet.
The Francombs recently worked with ethical financial advice firm the Path to transfer some of their pension cash from conventional funds to ones that align with the UN’s sustainable development goals.
Becky, who has just taken early retirement from the NHS, where she worked as a project manager, is a member of Extinction Rebellion along with her husband. They have both taken part in a number of actions and have both been arrested.
“As environmental activists, we didn’t want our pensions invested in anything that was causing harm – fossil fuels, weapons, anything like that,” she says.
“We do try to live sustainably – we no longer fly, have a mainly plant-based diet, and cycle instead of drive wherever possible – but, to me, moving our pensions is the most responsible thing we can do.”
Roy officially retired from his job as a community family worker this week and had a lump sum with Standard Life, which he has transferred.
The couple’s cash is now in a range of funds operated by companies such as Baillie Gifford (its Positive Change Fund), Fidelity (Sustainable Water & Waste Fund) and Royal London (Sustainable Leaders), where the top holdings include the electric car manufacturer Tesla and the US biotech firm and Covid-19 vaccine maker Moderna.
David Macdonald, the founder of the Path, believes this is by far the best way individuals can help the environment. “Without checking exactly how and where pension funds are invested, people could be propping up companies that support fossil fuel developments, deforestation and those involved in warfare,” he says.
Most workplace pension schemes automatically default members into a prescribed fund, although many offer an ethical or sustainable fund option and will allow employees to allocate some or all of their money to that.
If you are unhappy with the options available, you could contact the trustees of your workplace pension scheme to ask how much of your money is invested in – for example – fossil fuels, if there is a divestment option (where money is moved out of things such as oil, coal and gas companies) and, if not, could one be set up.
Investments
Choosing ethical funds has definitely paid off for investors. Data from the investment firm AJ Bell shows that the average 10-year total return from UK non-ethical funds stood at 81% at the end of September 2020, while for UK ethical funds it was 104%. The top-performing ethical fund over the 10 years, with a 196% return, was Royal London Sustainable Leaders.
The number of funds available is growing all the time. However, as each individual has their own views about the companies and sectors they are happy to support with their cash, and how much risk they are willing to accept, it is a good idea to talk to a financial adviser.
There are also a number of ethical investment platforms that typically allow people to invest directly in bonds or shares issued by charities and businesses. They include Ethex, Abundance and Triodos’s crowdfunding site.
Mortgages
It used to be pretty much only Ecology building society that was selling green mortgages but there are now a few lenders offering them.
For example, last June, Saffron building society launched the Retro Fit Mortgage, which rewards borrowers with a rate reduction if they carry out work that improves a property’s energy efficiency, and Nationwide has a similar offer for additional borrowing. Similarly, NatWest recently launched a scheme where people who buy a home with an energy performance certificate rating of A or B can get a reduced rate and £250 cashback on selected fixed-rate mortgages.
