How your savings can fight climate change

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Bethan wants to invest her savings sustainably but struggles to know where to start

A year ago, Bethan Batiste began to wonder if she could use her savings better.

“I’ve always been very concerned about the weather,” said the 23-year-old. “I watched a lot of YouTubers. And I think this was one of them that got me going, yeah I should be watching my money.”

Bethan works part-time in a shop in Guernsey and can’t save much, but she has £ 1,000 set aside for a rainy day, and she would like to know that it didn’t hurt more than good.

“I don’t want to finance fossil fuels or big mining,” she says.

As the urgency to act on climate change has become clearer, many people feel the same: wonder if by moving their money they could make a difference.

Demonstration against the Extinction Rebellion

Many environmentalists don’t want anything to do with the fossil fuel industry

But as Bethan discovered, investing sustainably can be daunting. Many investment and savings providers claim how climate-friendly their products are, but it can be difficult to determine the real impact they are likely to have.

There are plenty of options, says Lisa Stanley, co-founder of the Good with Money website, which provides information to facilitate ethical investing. He says he offers a jargon-free guide for new investors, like Bethan, and that it is funded by advertising and a kitemark program that he manages.

“The first step is to take a look at your bank: are you satisfied with its environmental record? Mrs. Stanley said. “In general, I would say that the products of traditional High Street banks will not be the most environmentally friendly.”

Bethan could transfer her £ 1,000 to a savings account at an ethical bank or building society, says Ms Stanley, or she could look for a climate-friendly investment fund.

Usually, these funds simply eliminate specific sectors considered problematic, such as high energy, tobacco and armaments.

However, some funds will take a more active approach, pushing for more climate-friendly strategies or investing in companies that have a positive impact on the planet.

Green investment: where to start?

  • If you stick to cash, consider placing your money with a bank or provider that focuses on green issues.

  • Take advantage of tax-free savings allowances, such as ISAs, but don’t forget to keep a reserve – money that you can easily access if you need it.

  • Look for a ‘climate friendly’ investment fund that matches your priorities, choosing sustainable or ethical options on online platforms

  • Consider a fund that actively selects stocks that promote decarbonization, like renewables, or a fund that works for change in polluting industries. This is called “impact” investing.

  • If you want to choose your own actions, beware of the “good tips” of social media. Sustainable stocks carry risks like any other investment

  • Check where your pension is invested

  • If you have larger sums to invest, consider hiring an independent financial advisor

Source: Voucher with money Guide to the first investment

There has been a boom in sustainable investing in recent years, due to the growing awareness of environmental issues.

And as governments have made their commitments to tackle climate change more clearly, investing in companies that are on the right side of the transition has also started to make financial sense, adds Stanley.

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Is Tesla a green action or not?

But what should be considered a green investment is not always easy. For example, some funds give the electric car company Tesla a high score for its products. Others place it at the bottom of the list of climate-friendly products, due to its alliances with Bitcoin and the damage done by mining lithium for use in its batteries.

If Bethan chooses a fund that simply avoids investing in fossil fuel companies, she might find, upon digging deeper, that he still invests in oil refineries or other closely related businesses.

So, she is not sure that such a fund would go far enough. “I’d much rather know that the money was going for a good cause, rather than just avoiding the bad things,” she says.

This is the approach adopted by Louis Velati. At school, he took part in the Friday climate strikes. When he inherited some money, the 20-year-old physics student in Manchester decided to put his money where it was and started researching green investing.

“I’m a bit of a geek and the confinement was an opportunity to dive deep into it,” he says. He found websites like MoneySavingExpert that could help him familiarize himself with the new concepts.

He focused on Triodos, a Netherlands-based bank with a strong focus on responsible investment, as it offered the opportunity to actively support climate-friendly sectors like wind power, while avoiding harmful sectors.

“Impact investing funds were very exciting,” says Louis. “I really liked the way you could see where your money was going. You feel very connected to the projects your money is going to.”

Another option for Bethan could be to choose a fund that promises to engage positively with companies, instead of simply avoiding high polluting sectors.

Learn more about the climate change slogan

Learn more about the climate change slogan

Learn more about the bottom line of climate change

Learn more about the bottom line of climate change

The engagement means the fund manager will call for change and support climate motions at shareholder meetings, says Stanley.

More active approaches avoid some of the pitfalls into which sustainable investing can fall. In recent years, there has been a boom in large ESG-labeled investment funds – environmental, social and corporate governance funds – reflecting a very wide range of ethical considerations, from workers’ rights to the quality of management. the company.

Huge investment flows have poured into ESG funds, as interest in responsible investing has grown, but their impact on the climate is sometimes not as good as the marketing suggests.

A report from InfluenceMap, a think tank, looked at investment funds using a pro-climate branding.

The think tank found that less than half of the funds had global investments aligned with globally agreed climate change goals.

Another recent study by the French business school, Edhec, found that “greenwashing” by funds claiming to be climate-friendly masked the limited impact of their investments.

Louis Velati

Louis spent confinement looking for green investments

He said the money was not going to companies that improved their environmental record, while many that were deteriorating were still being funded.

One of the top fund managers, BlackRock’s Chief Investment Officer for Sustainable Investing, Tariq Fancy, quit his job frustrated. He denounced ESG investing as “sustainable babble,” arguing that it does more harm than good because people think they’re tackling climate change when they aren’t.

Ultimately, however, these issues will need to be addressed, says Ben Caldecott, Lombard Odier associate professor of sustainable finance at the University of Oxford, as shifting financial flows is a critical part of the decarbonization process.

“There is no solution that does not involve the financial sector changing rapidly. There is no transition without that,” he said.

In fact, how to mobilize private finance is high on the agenda for the COP26 meeting in Glasgow, which will take place in November, where world leaders will develop new commitments and strategies to reduce carbon emissions.

“If we want to tackle climate change, we want fossil fuel companies to pay much higher interest rates, so it’s harder for them to raise funds.

“But we may also want companies engaged in the change to have access to cheaper capital,” says Professor Caldecott.

“What we don’t want is money going to companies that promise change but don’t keep their promises. This is the worst possible outcome.”

Standardizing rules and definitions and better regulation will help make green investing more effective, he says. But that doesn’t mean that individuals’ efforts now won’t make a difference.

If you decide to leave your bank, rather than sneaking out, tell them why, he suggests. Equally important is reviewing your retirement fund.

Caroline hopper

Caroline Hopper moved her pension to greener investments four years ago

That’s what Caroline Hopper did four years ago. She was shocked to find that her pension was invested in tobacco and fossil fuels.

When she raised the issue with her boss, the company hired a financial advisor to help staff choose new retirement investments they were happy with.

“I said, personally, that I didn’t want my fossil fuel retirement,” she recalls. “Now it’s in healthcare and technology and a little bit of impact investing – clean energy companies, circular economy companies.”

Since then, a campaign backed by filmmaker Richard Curtis has been launched, calling on everyone to do the same.

Research conducted on behalf of Make My Money Matter found that redirecting your retirement wealth could impact your carbon emissions 21 times more than going vegetarian or quitting flying, says the campaign manager, David Hayman.

“Your voice can have an extraordinarily powerful impact,” he adds. Some people shift their retirement wealth, he adds, but it’s just as helpful to put pressure on your existing pension fund to change.

“People should see money, not as a scary static investment in a Swiss bank safe, but as a hidden superpower to build a better world.”

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