What do dirty coal plants, unsustainable logging and the arms trade have in common? They all count on the financial support of leading high-street banks. When deciding on a bank, interest rates are not the only thing to look at, as the impact that banks have on society and the environment through their business-lending is immense. Even if you pay your credit card balance off every month and are not paying interest on a credit card debt, every shop that you use your credit card in has to pay a fee to the company. This means that credit cards, current and savings accounts, financial investments and even mortgages are all ways that you, as a customer, can make your money work for the causes you believe in.
Banks Only the Co-operative Bank and Triodos operate with an ethical mandate. Other banks, such as HSBC, claim to have adopted specific environmental and ethical policies, but that doesn’t necessarily stop them getting into bed with questionable companies. Make up your own mind about where’s best to invest with the Ethical Consumer Research Association’s Ethiscore website, which assesses and rates financial institutions based on a number of different policies and practices.
Mortgages Whether focusing on minimising environmental impacts, contributing to environmental or social charities, only funding environmentally sound houses, carbon offsetting through tree-planting or refusing to work with unethical or polluting businesses, green mortgages offer a range of ethical and environmental benefits to homeowners.
The Ecology Building Society has been offering green mortgages for 25 years; its ‘C-Change’ package gives borrowers 1 per cent off the standard variable rate on mortgage funds used to kit houses out with energy saving solutions.
The Co-operative Bank's mortgages funds several Climate Care replanting projects around the world, and claims to have offset more than 117,000 tonnes of carbon dioxide since 2000. Norwich & Peterborough Building Society’s green mortgage is fully portable (transferable to a new property) and loans with a loan-to-value ratio of up to 90 per cent are available; eight trees a year are planted for the first five years of the mortgage, which N&P claims will render your new home carbon neutral. Others are offered by the Hanley Economic Building Society, which donates £200 to Climate Care on completion, and Teachers Building Society, available only to teachers, which offsets its own emissions. The Ethical Consumer has more information on green mortgages.
Socially Responsible Investment (SRI) Testimony to the fact that the greater good need not always be at odds with maximising returns, the past decade has seen SRI grow from £1.5 billion to £9 billion. Although they vary greatly in 'green-ness', there are now nearly 100 ‘green and ethical’ retail funds, catering for a wide range of moral stances. A number of these can be wrapped into Individual Savings Accounts (ISAs).
Ethical pensions Going it alone with a self-invested personal pension plan (SIPP) is probably the only way to know you’re putting your money in precisely the right ethical investment funds. Many pension companies offer ethical choices, but beware of the ‘light-green’ attitude of some funds, which may include investing in companies with dubious credentials – including oil companies – that have been included based on the promise of meeting self-defined environmental targets sometime in the future. Friends Provident’s Stewardship fund offers ‘long-term capital growth through investment in ethically screened UK shares’ – and yet invests in Tesco, so be sure you’re comfortable with all the companies in a portfolio.
Axa established its own ethical fund in 1998, and offers access to the Jupiter Ecology fund, which invests only in companies ‘committed to the long-term protection of the environment’, and the F&C Stewardship Growth fund, concentrated in community-focused UK companies, while Legal & General, Skandia, Prudential and Scottish Widows offer ethical options.
Credit unions Owned and controlled by their members and run for their benefit, credit unions offer a range of services including current accounts, ISAs and child trust funds. Whether it is a location, employer or association, members of credit unions share a ‘common bond’. Local, ethical and tailored to the needs of its members, credit unions are part of a growing movement that allows people to borrow money within a defined community. The Association of British Credit Unions Ltd has 400,000 members in more than 400 credit unions.
Community Development Finance Institutions (CDFIs) Delivering a healthy return as well as social benefits, CDFIs offer investment and business advice to individuals and organisations aiming to increase wealth in disadvantaged communities. They offer loans to start-ups, female- and ethnic minority-run businesses, as well as to those on low incomes. Portfolios grew by 15.8 per cent in 2008, to £331 million. Socially minded investors get their investment back at the end of five years, with income or corporation tax relief worth 5 per cent per annum, and the knowledge they’ve done something to help the communities that need it most.