Clean up your Money - make it Green
Making your life more ethically bearable is never straightforward, but the prospect of working out what to do with your money adds yet another complexity. You might be recycling, composting, dressing your family in hemp and using eco-friendly cosmetics, but if your money is being used for ethically nefarious purposes, then your green credentials will start to look a little shabby.
Giving your finances an ethical makeover is a challenging task, but one that has become easier over the past couple of years. Ethical finance as a market sector has exploded, its massive growth spurt coinciding with Fair Trade and organic produce becoming more 'mainstream'.
There are three ways you can get involved with the ethical finance sector.
Everyday banking
Large banks lend your money to a wide range of individuals, businesses and organisations, not all of whom will sit comfortably with an ethical stance. If you are unhappy with your bank in this respect, your current account is the easiest one to switch quickly to a more ethical institution.
Sadly, your only options here are the Co-operative Bank and the internet-based Smile that, like the former, is part of the Co-operative Group, the UK's largest consumer co-operative. This dismal lack of choice is a result of the fact that whereas the Co-op turned away business worth tens of millions last year, as the companies involved did not meet their strict ethical criteria, it's difficult to imagine HSBC doing the same. Predictably, the Co-op topped the 2006 Business in the Community Corporate Responsibility Index, at 99.5%.
Triodos is the only other bank that has an ethical stance, but it only offers savings and investment. Triodos is soon to float in order to raise funds for overseas expansion, and account holders will be able to buy discounted shares.
Mortgages
As UK house-prices continue to climb, an increasing proportion of our income goes into mortgage payments. The majority of mortgages are provided by high street banks, few of whom have a spotless ethical record.
However, if you are considering renovating, converting or building an eco-home, the Ecology Building Society might be an option. They specialise in lending on projects that use sustainable methods and materials. This can be invaluable for eco-projects using unusual techniques as these are often rejected by mainstream lenders.
Other lenders market 'green' mortgages, which donate a proportion of your payments to carbon-offset schemes. However, you should be aware that they are often less competitive than standard mortgages. There is a compelling argument for getting the best mortgage available and donating independently.
Savings and investments
Traditionally, socially responsible investing (SRI) has been the poorer relation of traditional shares, as the 'booze, bets, bombs and butts' stocks of the amusingly-named FTSE 'sindex' have radically outperformed ethical stocks. It's very likely that you have some financial stake in the stock market, though you may not be aware of it: products including pensions, ISAs, savings bonds and life assurance are all equity based. However, SRI offers some realistic solutions to this dilemma.
There are two areas of SRI: positive, or 'light green' investing, and a negative, or 'dark green' style. Light green investing gives companies bonus points for any efforts made towards social and environmental responsibility. An example is the FTSE4Good index, which has some surprising members including BP and some mining companies.
A dark green style of investing assesses companies against an ethical checklist including bad working conditions, animal testing and environmental damage. If a company indulges in too many of these practices, it is excluded. This means that a dark green fund is far less likely to have undesirable companies in it, but it also drastically reduces the choice of stocks, making it inherently more risky.
However, despite the risks, SRI is increasingly popular, with £6bn invested in UK ethical funds during 2006. A fantastic resource for SRI enthusiasts are the Ethical Investment Research Services. They can also direct you to an independent financial advisor (IFA) with experience of SRI, who can help you develop an investment strategy that both your ethics and pocket will be happy with.
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written by Olwen Jones - Olwen Jones is a freelance journalist and money coach. Her business, the money tree is dedicated to helping people and businesses find the best deals and manage their money more effectively. Her motto is "how much?!! I could get it cheaper than that..."
