Choosing ethical means you can save the planet while growing your savings
If you don't wan't to be responsible for hardship and horror, you may need to make a change, says Simon Read
When Show Han Marletta became fed up with seeing her bank hand out credit cards, seemingly irresponsibly, to people who might not be able to afford them, she decided it was time to switch.
"It was my money they were using to encourage others to get into debt, and I realised I really had no idea what they were doing with my cash," she says. "They could be funding nuclear weapons or other dubious activities, such as human trafficking or gangsters.
"I decided I wanted a more ethical alternative – a bank where I could keep my money and know that it wasn't doing harm in the world."
The 37-year-old, who runs a crockery stall at Cardiff market, switched to the Co-operative Bank, which has a long-established ethical policy. The bank launched it more than 20 years ago, in 1992, and it covers four key areas: human rights, international development, ecological impact and animal welfare.
The policy means the bank won't lend to firms that systematically fail to implement basic labour rights; those involved in fossil-fuel extraction such as coal, oil and gas; companies involved in animal testing for cosmetic or household products; or businesses which sell weapons to oppressive regimes.
"I stayed with the Co-op for a while but then saved a bit more money – although only a few thousand – and decided to look for alternatives," Show Han says. She discovered Triodos Bank, which takes the ethical approach a stage further by actually giving customers details of which businesses their money is used to fund.
"I like it because it's really transparent," she says. "They send me a list of the companies they help, so I can see what my money is being used for. They help organic businesses, such as farmers and those involved in fair trade, of which I'm very much in favour."
There's a growing demand from consumers for their companies to be more ethical. Witness last year's so-called "shareholder spring" when they rose up against bosses paying themselves bulging bonuses.
There have also been some high-profile shareholder activists attending companies' annual general meetings in an attempt to call them to account. Campaigning MP Tom Watson did so last year at the AGM of News Corporation, the owner of The Sun newspaper. He confronted the firm's chairman, Rupert Murdoch, about the phone-hacking scandal.
Before that celebrity chef Hugh Fearnley-Whittingstall went to Tesco's AGM in Solihull to try to force the supermarket chain to improve its standards of chicken-rearing.
This week, the development finance organisation Oikocredit launched an investment footprint checklist to help people ensure that their cash is used in ways that they want.
Patrick Hynes, national director UK for Oikocredit, said: "Consumers are caring more and more about the social and ethical consequences of their day-to-day decisions. Finance is no exception – the social impact of where we invest or save our money is just as important as buying fair trade or recycling."
The organisation's guidelines suggest savers and investors quiz finance firms on their mission and values, including their policies on people, profit, the planet and transparency. The aim, in short, is to make sure your investments match your ethical, social and environmental concerns.
IT consultant Ian Sewell is another investor who's concerned about how his savings are used. "I'm saving for my retirement and I have various investments where I've built up a portfolio worth tens of thousands of pounds.
"But my philosophy is that it's my money. So I don't want to give it to someone who does something with the cash that I don't agree with."
The 40-year-old from Maidenhead says he not only tries to avoid having his cash used to fund certain areas, but he also likes to see it being used to help what he considers are positive businesses.
For instance, he wasn't one of those investors who rushed to buy shares in Royal Mail: "I wouldn't invest in Royal Mail just for the profit. I believe you have to think beyond the money aspect. I want to know that my money is doing good."
So while he makes sure his cash isn't used to fund the arms trade, he does like to see it being used in renewable energy and other positive environmental activities. He, too, has moved some of his savings to Triodos, because he likes knowing exactly which companies his cash is helping.
"I'm very keen on anything to do with micro credit," he says (when cash is used to fund small farmers, for example). "I hate that there's so much dumping of over-produced food. If we actually help people to grow the food for the region they live in, they can sell in the region."
He's also convinced that ethical firms have a better chance of making a success of their business than those which don't bother to try to make a positive difference. "Companies that are ethically run tend not to collapse so easily. They have to meet certain extra requirements that seem to mean they run their businesses better."
A survey published to coincide with National Ethical Investment Week, by the UK Sustainable Investment and Finance Association (UKSIF), suggests that almost two-thirds of British savers and investors would like to be offered sustainable and ethical options for their pensions and investments.
The survey uncovered concern that poor corporate governance and companies pursuing unethical or unsustainable business practices – such as in oil or gas – could actually put investors' money at risk. Some 43 per cent of people said they would move their money out of such a company.
Simon Howard, chief executive of UKSIF, said: "Green and ethical investment is no longer just a moral issue. It is a hard-headed decision about the best way to manage your savings and plan for the future.
"Millions of people do not realise that their pensions and savings support companies which are contributing to climate change, depleting scarce resources and exploiting cheap labour. Businesses whose activities contribute to environmental and social problems face a range of risks, from government regulation to consumer boycotts which could see them lose value in the future.
"But you can make a positive decision to invest in companies that are helping to solve these problems and create a more sustainable future. Businesses which have thought about these challenges and how they can make money by tackling them may be good bets for future growth."
Meanwhile, research by Triodos suggests that almost 17 million investors potentially hold assets which would not meet their personal ethical preferences. Analysis reveals that 54 of FTSE 100 companies and 111 of FTSE 250 companies operate in activities to which investors are ethically opposed.
Huw Davies, head of personal banking at Triodos Bank, said: "Many of us have pension or stock market investments and do not realise that a proportion of our portfolio may be invested in those sectors we find personally distasteful.
"And if we are put off by investments in certain sectors, it's down to us all to look underneath the bonnet of our investments to ensure we are happy with how they are invested."
There's also the argument that by going green, you could get better returns. According to Moneyfacts, the personal finance data provider, ethical funds have outperformed non-ethical funds in the last three years, up 36 per cent on average compared with 31 per cent for the average non-ethical fund.
In other words, the received wisdom – that choosing ethical means accepting less returns on your savings – is being overturned. That suggests you can save the planet while growing your savings.
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