How to find ethical options when it comes to saving and spending
Four-fifths of adults would like their investments to do some good, so here’s how to seek out options that can help both people and the planet.
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Louise Thomas
Editor
Being “good” with your money can mean different things, depending on who you ask.
For some, it can simply mean getting the best returns for your money, but for others it can also be about making sure that your hard-earned cash is being put in places whose ethics and values align with your own.
Good Money Week (September 30-October 6) is an initiative designed to help people in making money choices through their banking, pensions and investments.
Co-ordinated by the UK Sustainable Investment and Finance Association, the week aims to raise awareness of the benefits of sustainable and ethical investment and finance.
Roger Hattam, director of retail banking at Triodos Bank UK says: “Whether it’s where you bank, how you invest, or what you choose to spend your money on, aligning your finances with your values makes a real difference.
“This week, Good Money Week is highlighting how our financial choices can help create a positive impact for people and the planet.”
Research suggests there’s significant interest in sustainable finances among households.
According to a Financial Lives Survey from the Financial Conduct Authority (FCA), four-fifths (81%) of adults would like their investments to do some good as well as provide a financial return.
It can be hard to know where to start when considering ethical finances, but making a few tweaks to the way money is spent – or saved – could make a big difference.
Other people will be making similar decisions too, which could have a significant impact. So how to get started?
1. Think about what you stand for
Hattam suggests reflecting on your principles and values, so that you have an idea of what you want to align your money with.
“Despite what you might have seen in films and TV programmes, when you deposit your savings in a bank account, the bank doesn’t just lock them up in a vault and leave the money there,” he says.
“Instead, it is lent out to organisations and individuals that the bank chooses.
“So right now, your money is funding activities you either agree or disagree with. Take some time to reflect on your values. What do you care deeply about? Climate change? Animal welfare? Human rights?”
He suggests: “Research the institutions you’re thinking of banking with, and how they invest your money – such as whether they have credible policies on carbon emissions, sustainable development, or ethical labour practices.
“Knowing what kind of businesses your bank or investment platform funds will empower you to make decisions that support a better future.”
2. Consider what the ethical options are for banking and investments
“Not all banks and financial institutions operate on the same ethical playing field,” says Hattam.
He says guides are available, such as those from Ethical Consumer and Which?, to help people navigate the world of ethical banking, including savings and current accounts – “so your money actively supports causes you care about”.
3. Be aware of greenwashing
Greenwashing happens when firms overstate or mislead people about the environmental credentials of their products or practices. They may also underplay some aspects of their behaviour to make what they do appear more environmentally-friendly.
To help people make informed decisions with their money, the FCA has been working with other regulators to address greenwashing and launched anti-greenwashing guidance for firms.
Rules have been designed to protect consumers by ensuring sustainable products and services they are sold are accurately described.
Hattam suggests that consumers should look closely and “dig deeper” into any sustainability claims a financial provider makes.
He suggests: “Ask questions about how they define ‘sustainable’ and whether they exclude industries like oil, deforestation, or exploitative labour.”
4. Don’t overlook your pension
Pension providers and financial advisers can all be useful sources of information when finding out how your pension is being invested. If it’s a workplace pension, you could ask your employer.
Helen Morrissey, head of retirement analysis at Hargreaves Lansdown says: “If you have strong ethical views on what you do with your money, then there is a lot you can do to make sure your pension is invested in line with your values.
“Your pension provider should be able to give you details on what you are currently invested in and talk you through any options that might suit you better.
“Check to see what online resources they offer in terms of fund information, research and educational articles.
“If you find that your current pension provider does not offer you the flexibility you need then it’s worth checking what other providers can offer you – Sipps (self-invested personal pensions) for instance offer an expanded investment choice that may suit your needs better.
“If you have any questions or concerns about what is the right option for you then it’s well worth speaking to a financial adviser.”
5. Consider ethical options when spending
Sourcing second-hand or refurbished items where possible can help the planet. Some stores, such as Marks & Spencer, John Lewis and Boots also operate recycling schemes.
Some high street store schemes offer vouchers or other perks in return for recycling, so you may even get something in return, which could make you feel even better about your efforts to do good.
6. Finally, remember that consumer power can help drive change
Hattam adds: “It’s easy to feel like your individual decisions won’t make a difference, but collectively, your money has enormous power.”
He says the more people move their money to ethical providers, the more firms will feel the need to alter their own practices.