How to Make Ethical Financial Choices
Ethical money solutions help us do some good for the planet with our everyday finances. Read on to learn more about ethical financial solutions including ethical current accounts, savings accounts and ISAs, mortgages and green energy tariffs.
Ethical money solutions
We all want to be ‘good’ with our money, but what about trying to do some good for other people and the planet, with it, too? In addition to thinking about how much money we save, or how much we make, you can also consider how you can support businesses, organisations or causes you believe in, or boycott those that you don’t, with your personal finances.
This is becoming easier as the area of ethical money grows, with more opportunities to spend, save, invest and borrow with the climate and society in mind.
Ethical current accounts
Banks use your money to make loans, including to some companies that you may not be so keen on. If you do your research, however, you can switch to more ethical alternatives.
Look to organisations such as Ethical Consumer, which ranks banks by their ethical credentials, like being clear on how customers’ money is being invested, paying its fair share of tax, and not funding climate change.
Local building societies may be more likely to support causes that you believe in than high street banks. This is because they are ‘owned’ by their members and do not have a mandate to make money for their shareholders like banks.
It is easier than you might imagine to switch your current account, to a new bank whose ethics, or choice of companies that it lends to, match your values more closely. The Current Account Switching Service will move your direct debits and money over for you within seven days.
Ethical cash ISAs and savings accounts
You can still earn interest on your savings with an ethical bank.
In addition to a current account, some ethical banks offer a range of cash savings accounts, including cash ISAs, regular savers, fixed-rate bonds and children’s savings accounts.
In some cases an ethical savings account will mean that savers’ money is only lent to charities and social enterprises. Your money might be used for anything from supporting adults with learning disabilities, to affordable housing or helping the homeless.
There are also savings accounts where interest is paid to savers, plus a donation to an environmental charity chosen by members.
Ethical investing and ethical stocks and shares ISAs
When you invest in stocks and shares you are buying a small slice of a company. But are you happy with the companies your money supports?
There are a growing number of ethical and sustainable funds and stocks and shares ISAs available. You can either screen out sectors that you don’t want to support, for example, gambling, or tobacco, or invest for positive impact into companies that are trying to solve issues such as climate change, gender or racial inequality, or who are doing more to promote good business practice. The challenge is often to define what is ethical. Watch out for greenwashing, where something is not quite as ethical as it seems.
Look at the top holdings in an ethical fund in the fund factsheet, and use your judgement on whether they match your own priorities.
» MORE: 5 tips about ethical investing
You could get a discount on your mortgage if you are prepared to upgrade your home to make it more energy-efficient. Some banks also offer lower rate green mortgages to those borrowing to buy an energy-efficient new-build property from a list of approved house builders.
Green energy tariffs
Switching utility suppliers is an easy way to save money each month, but you could also do so to encourage more investment in sustainable energy. Being on a renewable tariff doesn’t mean that what comes into your home from the National Grid is always 100% green, but if not it will be replaced with renewable energy by the supplier, and many suppliers also put their time and efforts into changing the energy mix in the UK.
WARNING: We cannot tell you if any form of investing is right for you. Depending on your choice of investment your capital can be at risk and you may get back less than originally paid in.
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Laura is a journalist and author, writing about money since 2008. Including writing for The Times for 9 years. She believes finance doesn't need to be complicated. Author of Money: a user's guide. Read more