Most of us have some money in a bank account or saved with other financial institutions. Modern life appears to require a current bank account, at the very least. You may also have a savings account or ISA, and a pension fund – or even invest in stocks and shares. But do you know how your money is used by those companies?
Even an ordinary current account is providing funds for the banks to invest in a wide range of projects. You may not receive any interest – but they will. So it’s worth trying to find out what they use your money for – and whether you are happy about it.
Our TDEG meeting on 15 February focused on these issues. Jill Turner, a local financial adviser, shared with us some thoughts on ethical investments and how to ensure your money does some good in the world.
“Doing Good With Your Money” – TDEG Whole Group meeting – Wednesday 15 February 2023
Jill began her presentation by explaining that research shows that 74% of us want to do good with our money. She provided a historical context, and said that faith groups dominated early ethical investments, and she referenced religious figures such as John Wesley, and Charles Jacob, a Methodist stockbroker in the City.
Jill feels that we have nine or ten years left to make a positive impact on the rate of climate change, and so the need to use money in a way that is sustainable for the planet is imperative. She recommended a film made by the Kogi Indians about the ecological crisis – “From the Heart of the World“. She also recommended Pope Francis’s encyclical letter ‘On Care for our Common Home‘.
Jill talked about the need to “negatively screen out” companies holding money that do not act ethically, and gave the example of HSBC recently making a secretive multimillion dollar loan to an energy company bulldozing a village in west Germany, in order to expand a huge coal mine. You can read more about this case here.
However it is possible to make sustainable investments. Jill said 54% of us also want our money to have a positive impact, and 32% want our investments to be fossil free. The UK Sustainable Investment and Finance Association (UKSIFA) is an organisation that supports this. She stressed the need to research what companies do with the money they are investing on our behalf – what they are investing in, and why. Some banks state they no longer fund new fossil fuel development, but they may continue to fund existing projects.
Following a question from an audience member, Jill said at the moment there is not a good sustainability rating system that can helpfully label products, but the UKSIFA is looking at this issue.
Another question from the audience was about how you can know what an ISA is investing in. Jill said that you need to look at the funds inside a shares ISA; with a cash ISA you could talk to the issuer. This information should all be available on the ISA fund web site or through a telephone call.
Another person asked if there are any banks that are known to act ethically. Jill listed the Smile Bank, Unity Bank, Triodos Bank and Monzo Bank (TDEG would add here that we have been advised by FoE to bank with the Co-Op Bank – also known as an ethical bank). The Ethical Consumer Magazine was mentioned as a helpful guide (more information on this below).
Jill spoke with enthusiasm and knowledgeably about this area, and her talk was much appreciated. Her contact email address is jill.turner@bigpicturefp.co.uk and she is based in the Tideswell Institute offices behind St. John’s Church. You can find out more about her financial planning service on her web site. If you would like her to complete a ‘sustainability MOT’ of your savings, just get in touch with her.
TDEG Ethical Consumer Group comments
Following Jill’s talk, TDEG’s Ethical Consumer Group has collated some further notes about ethical investments and other financial issues. We are not financial experts, and this is not a comprehensive summary, but we hope these notes and links to further information are useful.
Banking
The Ethical Consumer organisation has recently reviewed many banks to investigate which offer the best sustainable and ethical services. Ethical Consumer regularly review a whole range of services and products – you can subscribe to their magazine here in order to access their detailed reports.
Ethical Consumer also provide a lot of good advice on their web site, even without a subscription. You can read their advice on banks (and the sort of questions you should be asking) here.
The tables below are a brief snapshot of some of their findings on banks and current accounts. But we recommend subscribing to the magazine to see the full details and for further information on savings accounts and other financial institutions.
Some Important Advice
Changing your current account to a different bank should be a straightforward thing to do. But moving investments around, particularly pensions funds, could be more problematic. So it is worth remembering this advice from Jill Turner –
- Whilst there may be a strong heartfelt and / or logical economic reasons to divest, financial advice should be sought. In the enthusiasm for selling down any current investments that may hold fossil fuel extractors, refiners and high users, investors could be sleepwalking into tax issues.
- For those who are members of superannuation or other employer pensions valuable index linked benefits and employer contributions would be lost and very expensive to replace from personal resources, it’s best to lobby the pension providers to bring about change.
- There are many approaches to sustainability and investors need to look beyond the label of a fund to understand the investment mandate. Some sustainable funds invest entirely in company shares ( equities ) and may not be suitable if you have a short term investment horizon or have a more cautious approach to investment and the ups and downs of the stock market would keep you awake at night. Again its best to seek advice from an independent financial adviser who can help match your attitude to risk with a suitable investment mandate.
Ethical Investments
Ethical investments are like all investments, they vary in returns and levels of risk. People need to decide how much risk they can have in their portfolio: if you need easy access and liquidity, your options will be different than if you can invest for a longer period. This is your first consideration.
Then you need to consider your preferences from a long list of investment areas, such as property, health, biodiversity, fossil fuels, armaments, tobacco, agriculture (there are lots of options). These are the sorts of decisions an investment advisor can help with through comprehensive questionnaires.
There is a choice of Fund Managers in ethical investment who will each take a different approach to what they will invest in. Ethical investment fund managers are approachable if you have specific questions about their funds. The larger Fund Management companies will usually have some ethical funds.
There is a movement called B Corps which is trying to transform the global economy to benefit all people, communities, and the planet. They are doing this by developing a network of ethical companies, and their own standards and certification process.
Examples of ethical fund management entities include Tribe and Montanaro, both of which are certified B Corps. They have both made comprehensive commitments to ethical, environmental and social standards.
You can search for other fund management and financial companies certified as B Corps on their website by searching against types of business.
Pension Funds
Jill has also since sent some information for people with pensions from the public sector. You may be wondering if the funds invested to provide you with a pension in the future are invested ethically on your behalf.
When it comes to local authority or other public sector pensions, the reality is that they are unlikely to change much as they’ve got a fiduciary responsibility towards employees that will prevent them from taking risks with funds. But people are advised not to withdraw from the fund on the basis of it not being ethical because you’ll risk losing loads of money. Always seek financial advice first.
Update!
An even better reason to subscribe to the Ethical Consumer Magazine. Their most recent edition (April 2023) focuses entirely on financial issues. So lots more detail there.
Your can subscribe to the ECM here. Or you can browse through TDEG’s copies during a coffee and cake break at our regular Repair Cafe events, every third Saturday in the month at Tideswell Community Hall.
Further Useful Sources of Information
The best thing we can all do is to make our views about ethical investing known to the fund manager of our pension, whether it be a public sector, private sector or individual pension, which is where the Make My Money Matter campaign can help you with what to say.
Friends of the Earth are also working with UK Divest to campaign for divestment from fossil fuels across the financial industry. Their UK Divest Report is well worth reading to learn more and find out how you can take action. They have also produced a useful checklist of questions to put to your pension funds.
It is our money – we should be able to choose how it is invested.
