How to move your money out of fossil fuels
More and more people are now asking “How do I get my money out of dirty energy and stop funding global warming?”
As part of the broader divestment campaign, which to date has focused on institutional investors, Ethical Consumer has been asking individuals to divest their own personal finances.
There are many ways for individuals to make an immediate impact.
Ethical Consumer presents the best options for leaving behind the carbon age and becoming pioneers in the fast-developing post-carbon economy.
Our campaign focuses on switching your
- current accounts
- savings accounts
- cash ISAs
- investment funds, and
away from companies still funding fossil fuel projects.
More than just divestment
The transition away from a fossil-fuel economy requires not just divestment from carbon but also much investment in new capacity to produce energy from renewable sources. In a way, this makes the new divestment movement a bit more complex than those of tobacco and South Africa.
This marks the beginning of a shift in thinking in the personal finance sector. The ethically safe haven of a traditional building society is beginning to look less good when faced with the question “Who will finance new renewable capacity?”
Most people in Britain do not directly own shares but almost all of us have bank accounts.
A significant amount of finance for new dirty energy extraction comes from our own banking sector, and campaigners around the world are beginning to measure and compare involvement and to name and shame the worst offenders. These include many household names such as HSBC and Barclays.
The good news is that ditching the banks that plough the most capital into the fossil fuel industry has never been easier.
If you’re looking to switch savings account there are a number of new banks that actively invest in renewables, making the impact of switching particularly effective. You won’t find them on the high street but all are subject to the same regulatory system as the big banks and are easily available online.
Triodos offers several types of savings accounts including cash ISAs. The Dutch bank has ethical investment policies that support low-carbon initiatives. Plus it publicly discloses its investments – a great practice for a sector that is resistant to openness and accountability.
Triodos offers financial services to a range of projects including organic food and farming businesses, renewable energy enterprises, recycling companies and nature conservation projects.
Charity Bank offers savings and ISAs. Like Triodos it also has ethical investment policies and publicly discloses its investments in an annual loan portfolio report which, in 2015, included a couple of renewable energy projects.
Charity Bank lends only to charities, social enterprises and organisations with a charitable purpose, and states that it conducts a social impact assessment for each loan.
The Ecology Building Society is another interesting alternative. It focuses its lending on projects that offer the greatest gains in terms of carbon reductions and environmental impact. Its ethical lending policy prioritises: sustainable housing practices, sustainable lifestyles, sustainable economic activity, and other ecologically positive projects and ventures.
Ecology offers a range of savings accounts but its cash ISAs are only currently available to “individuals who were members of the Building Society on 25 September 2015 and have not ceased being a member since this date.”
It is slimmer pickings when it comes to current accounts.
The Co-operative Bank is still the only mainstream bank that states its support for renewable energy organisations alongside a commitment not to provide banking services to the dirty energy industry. This makes it a good choice for people in the divestment movement. However, it’s now partly owned by hedge funds and it has no control over what these companies invest in.
Building societies offer another safe alternative. They do not making a point of supporting renewable energy, but neither do they invest in fossil fuels. The two national building societies, Nationwide and the Norwich & Peterborough, offer current accounts.
Direct investments and funds
Direct investments and crowd-funded projects offer interesting, if not more risky, options. We always suggest contacting an ethical financial adviser such as Castlefields, before you make any big decisions.
Our recent research on divested funds identified 2 funds as well ahead of the pack on carbon-free investments:
- The FP WHEB Sustainability fund scored well in our ranking system. FP WHEB invests specifically in environmental technologies such as renewable energy, and we could find very few investments worthy of criticism.
- Another good option is the Alliance Trust Sustainable Future European Growth fund. Alliance Trust Sustainable Future European Growth is fully carbon divested and discloses its full list of investments.
Crowd-funding platforms have also become a big part of the green revolution and are providing a great option for carbon-free investments and, perhaps more importantly, for direct investment alternative power sources such as community wind and hydro schemes. ETHEX, Abundance Investment, Energy4All and Sharenergy are all sites worth visiting.
When it comes to pensions, there are 4 basic (sometimes overlapping) options in a very complex area. Some are greener than others and none are without their own risks. Perhaps more than with any other type of investment you should consult a financial adviser before taking out any type of pension or moving your money around pension schemes.
1. Many people are already in an occupational pension scheme. These tend to be very traditional in their investment strategies and heavily invested in fossil fuels. However, most financial advisers are agreed that, if you are lucky enough to be in one of these, staying put makes financial sense. Shareaction is among a number of groups that can help you lobby your fund manager for carbon divestment.
2. Most employees in the UK were auto-enrolled into a pension scheme between 2014-2016 thanks to a government scheme. Nest is a government-funded body set up to provide clear, low-cost options to the pension market. Its ethical option is linked to the relatively well-respected F&C Stewardship fund. However, it is not carbon divested.
For carbon divested auto-enrollment schemes, we have written about some innovative work that Castlefield has been doing with the Alliance Trust Sustainable Futures Funds. They have recently been working with WWF and Greenpeace to set up largely fossil-free schemes for their staff, based on the Alliance Trust funds.
3. If you know what you’re doing, or have a financial advisor, you could also have a ‘private fund’ or personal pension (SIPP) as well as either or both of the above. These can be linked to an existing ethical investment fund or even to a carbon-divested fund. Abundance investments has also been working in this area with renewable energy projects.
4. You could also try 'off-piste' saving - bundling a number of different options, such as property, direct investments and ISAs - but this comes with more risk. Financial journalists are divided on the issue, but many say that property investments alongside ISAs will give you greater options in retirement. If ethically managed, this could be an attractive ethical option too. The idea of a pension pot made up of cash ISAs, property, and even a few direct investments in renewables, in the words of Ethical Consumer editor Rob Harrison “gives a glimpse of what might be possible without the compromises of using ethical investment funds with their mainstream shareholdings”.
Find out more about divesting your personal finances on the Ethical Consumer website.
Find out about Friends of the Earth’s work to get local authorities to divest from fossil fuels.