Here’s how green investing can be used to save the planet and help you live a richer life.
Green investing is not something you may have thought about when it comes to tackling climate change. Whilst we’ve all made a shift to using sustainable beauty brands, embracing veganism and recycling more, the real power lies with your cash.
Did you know that the money in your current account or savings is often used to support industries such as fossil fuels or even the arms trade? If you're not happy about that, then moving to an ethical bank and shifting your savings to green investments can help, allowing you to support causes you actually care about.
The good news is, you don’t have to make any financial sacrifices or overhaul your finances to help. There are straightforward actions that, once done, you never have to think about again.
Green investing: your guide
Here’s four simple ways to help you make your money go green.
1. Invest ethically
Investing is a great way to help your money grow, but green investing lets you invest in causes that you feel passionate about, such as protecting wildlife or promoting social housing.
Most investment providers now offer ethical funds for you to invest. If you have never invested, It’s easy to get started with ethical investing via what is known as ‘robo-advisers’ like Nutmeg and Wealthify.
These platforms offer ready-made ethical investment accounts, and pick funds for you, depending on your goals.
Nutmeg’s portfolios exclude tobacco, weapons, fossil fuels, mining and alcohol while Wealthify’s ethical plan invests in firms that make a positive impact via their environmental, social and governance (ESG) practices.
Investment app Clim8 only offers ethical funds which are managed by a team of in-house fund managers. The Big Exchange, co-founded by The Big Issue, is an online investment supermarket that only lists funds that are proven to be making a positive difference to the planet.
Investment platform Interactive Investor has put together its Ace 40 list to help you pinpoint what you’re looking for.
2. Green your pension
If you have a pension, then you’re already investing and it can also be used to do good by making sure it invests in the way you would like.
Getting a green pension is 21 times more powerful at cutting your carbon footprint than giving up flying, going veggie and switching energy your provider combined, according to research by campaign group Make My Money Matter, launched by Love Actually director Richard Curtis.
The average UK pension shockingly finances around 23 tons of CO2 emissions every year through the businesses it invests in, according to pension provider Cushon - so, it’s time to make a stand and let your provider know how you feel.
Most workplace pensions should offer an 'ethical' option which you can easily switch to. If they don’t, write to them and let them know it matters to you. Make My Money Matter has a handy template email to encourage pension providers to move to net zero and a template to request ethical funds.
If you’re self-employed, the pension provider Nest offers an ethical fund that you can pay into with a regular direct debit.
“Your pension might turn out to be the most money you ever have to your name, so if you have an ethical option available to you either with your current or former workplace pensions, it can be a brilliant way to move mountains for the planet, just by switching funds,” Becky O’Connor, head of pensions and savings at investment platform Interactive Investor.
3. Choose an ethical bank account
Don’t just stop at pensions and green investing, make sure your bank account is also using your money to tackle climate change and help society.
A shocking £150bn was invested in fossil fuels by UK banks between December 2015 when the Paris Agreement (an international treaty on climate change) was agreed and September 2019.
Not happy with that? Take a look at these green banks:
Triodos
Triodos is an ethical bank which invests exclusively in a wide range of impact business, from eco-tourism and social housing to environmental technology. Even its debit card is made using recyclable plant-based materials such as leaves.
Starling
Digital-only bank Starling has committed to not do business with companies that promote harmful behaviour - such as arms traders and tobacco firms. Co-op Bank has also restated its commitment to ethical banking in recent years.
For savings, the Charity Bank lends money to worthwhile causes in the UK, including over £11m to environmental projects since 2002. The Ecology Building Society bankrolls green initiatives while offering a range of savings accounts.
“If you only have time to do one thing, then switching current accounts is probably the one to go for as you can do this independently and quickly,” says O’Connor. “And it means that each month, your salary is supporting positive impact businesses.”
Switching your bank account is easy thanks to the Current Account Switch Service, where the transfer to a new bank is done within seven working days.
These banks also come with the same level of protection as other banks with the Financial Services Compensation Scheme, meaning if it goes bust, then you are protected for up to £85,000 of your savings.
4. Avoid greenwashing
When making ethical choices, beware of greenwashing - this is when a company or organisation claims to be more environmentally friendly than it actually is. Don’t be fooled and do some research around it - for example, if a beauty brand says it is cruelty free, see if it has the right certification, such as the leaping bunny logo.
Equally, when it comes to your money, do some research - just because a fund is labelled as ethical, it doesn't necessarily mean it is.
Before you invest, a good starting point is to look at the companies the fund invests in - not just the top ten.
You can also see how green your pension or investments are at isitgreen and Interactive Investor’s Ace 40 list. Check how green your bank is on the ethical consumer website.
Katie Binns is Staff Writer for The Money Edit.