INVEST YOUR MONEY RESPONSIBLY
How you save and invest your money can make a huge difference to the planet, as investment decisions made by banks and pension funds have profound implications:
they influence what businesses and consumers will do to tackle climate change;
they have the ability to shape the market and influence the global policy debates;
they influence which world we will live in.
Finding the best options in terms of current and saving accounts, investments and pension funds can be time very consuming and frustrating, meaning many savers are beaten into submission by a complex system. But we need to change this and take control of what our money finances!
Put together, pension funds manage half of the global investment market! They have an important say over how companies are run. As shareholders, they own companies and can influence the way they act. According to MakeMyMoneyGreener (3MG), making our pension greener can cut our carbon emissions 21 times more than going veggie, giving up flying and switching energy provider.
However, in 2018, 65% of the pension funds had no formal climate policy at all, and 85% had no policy to exclude fossil fuels from their investments and (ShareAction research).
Check what you can do below. For more info on pension funds, check this very useful FAQ developed by ShareAction, with tips on pension funds, retirement plans and more; or this more detailed guide developed by Good With Money.
1. Find out who your pension provider is.
If you do not know where your pension is invested, your HR manager is usually a good person to write to, or your line manager, or check on the government website the list of funds per employer. You could have more than one pension if you have had multiple jobs.
2. Find out where your money is invested.
Sadly, this is not that easy. Most pension funds only release the top 10 investments per fund, and these aren’t always publicly available. Start with your pension provider’s website – searching terms like ‘investment’ or ‘fund factsheet’ could be helpful, or take a look at their annual reports. If you can’t find company names, you might be able to find the indexes your fund invests in; then searching for that online should give you some company names.
You can also check how green your fund currently is with this Is It Green review, or check whether they are one of the signatories of the UN Principles of Responsible Investments (PRI), who commit to incorporate environmental, social and corporate governance (ESG) issues into their investment practices. ShareAction also issued a report on climate risk management of 25 pension schemes (2019). NEST for example scored highly in ShareAction ranking of the biggest UK pension providers, doing well on both how they invest and how they engage. (nb: Ratings are helpful, but the scale of disagreement between different agencies shows that they should not necessarily be relied upon in isolation – so check other rating agencies if you don’t agree with these rating criteria).
If your pension fund doesn’t make information easily accessible, you can email them to ask, or ask your employer to contact them on your behalf.
3. Tell your employer that you care about where your money is invested.
Lots of employers don’t know that having a sustainable pension is important to their staff. 3MG developed a template email that you can use to inform your HR manager. Monitor your employer’s reply and encourage them to switch provider, or the funds available to you, if the current fund does not have any relevant climate policy.
4.Start a conversation in your workspace
If you are unhappy with the fund options that are available to you, then the first step is to start a conversation about your pension in your workplace. When you’ve contacted your employer, tell your colleagues you did it and explain your reasons – to encourage them to support your initiative. The more of us that start demand better from the people who build funds, the better they’ll have to be.
5. Tell your pension provider to go green.
6. Tell all UK pension funds to go green.
7. Attend a general meeting
8. Switch for greener options if relevant.
Usually you have the option to switch funds when you are in a defined contribution pension scheme – DC (not when you are in a defined benefit pension scheme - DB). The easiest way to switch is to log-in to your online pension account (ask your pension fund or your employer for log in details). Don’t forget that there are other factors at play when you switch funds, such as cost and risk and you should make sure you feel comfortable with these.
You can also switch to pay into another provider by opting-out of your automatic-enrolment provider and paying into a personal pension or SIPP. However, you will almost certainly lose your employer’s contribution to your pension pot if you do so.
> If you have a self-invested pension plan (SIPP), contact your financial advisor or log in to your SIPP platform, ask where your money’s invested, check the sustainability ratings and see what options you have for making your money matter.
CURRENT AND SAVINGS BANK ACCOUNT
When you put money in a bank account, it doesn’t just sit underground in their vault. Banks use this money to provide loans to businesses so that they can grow their activities - some do good things for the planet and some causing harm.
Banks’ lending decisions are mostly made on financial grounds – will the business be able to reimburse the loan? However, environmental, social and corporate governance (ESG) issues are playing an increasingly important part in the lending decisions as well. Some banks won’t fund certain companies based on what their industry and/or their practices. So choose a bank with solid ESG or ethical practices, to feel secure knowing that your money isn’t being loaned out to a project or company you disagree with.
1 > Research which ethical banks are out there
Several guides can help you. As ratings and scales do not use the same criteria (e.g., policies vs. practices, commitments vs. current portfolio, different priorities such as fossil fuel, gender, tax evasion), their conclusions will be different – hence the need to define your own priorities before and find the rating scale that best match them.
2 > Switch bank if need
Make sure that your bank is clear about how it invests your money. How are they performing in the various guides/research suggested above? Vote with your pocket by moving your current account and your savings for the climate.
If you are switching accounts for ethical reasons and want to write to your previous bank to let them know why, you can use this template letter from Ethical Consumer.
INVESTMENTS ACCOUNTS AND DIRECT INVESTMENTS
Investment accounts such as Individual Saving Accounts (ISAs) work quite similarly to pensions. Your money goes into a fund and might be used to build a world you’re uncomfortable with.
1. Find out what your investments are
As for pension funds, search the name of your ISA/investment provider plus ‘responsible investment policy’ on the web. Look at their website, and search for information on their current investments. Do they say they exclude or target investment at any companies or sectors? Is it reflected in their current portfolio?
2. Check their evaluation on different guides / research.
As for bank accounts, make sure you understand the rating criteria and that they match your priorities.
3. Switch for a good ethical investment
...if your current account is not aligned with your priorities.
Online investment platforms enable seasoned investors to instantly move their money between thousands of complex investment choices. A wave of new entrants have created approaches designed to attract less-experienced investors and those with small amounts of money to invest. A number of specialist ethical providers are among this new wave.
1. Check the review of these platform at the bottom of the Ethical Consumer page on investment funds