Green money: how your finances can help the planet

Make sure your cash is used in an environmentally friendly way, from current accounts to pensions

Switch your bank account

Moving the account you use for everyday spending is one of the easiest ways to make sure your money is being used in an environmentally friendly way.

It’s often hard, or impossible, to find out exactly what the big banks are investing people’s money in, or supporting in other ways.

So if you want to be sure your cash isn’t going towards financing industries or projects harming our world, seek providers who are explicitly backing green projects.

Arguably, the UK’s most ethical current account provider is Triodos Bank, based in Bristol and part of a group founded in the Netherlands. It says it only finances organisations making a positive impact for people and the planet.

Its current account, operated online and via an app, comes with a contactless debit Mastercard and offers an overdraft of up to £2,000. But there’s a £3 monthly fee, and no high street branches, so it won’t suit everyone.

Of the high street banks, the Co-operative is the only one that has expressly prohibited support for fossil fuels, says Ethical Consumer, an independent, not-for-profit organisation that reviews companies and products. The Co-operative Bank calls itself “the original ethical bank,” but is now majority-owned by a group of hedge funds and fund managers, which may trouble some.

Then there are app-based banks such as Monzo and Starling, which may well be “cleaner” when it comes to what they invest in and lend to because they are newer, smaller, and don’t necessarily have financial interests around the globe, but aren’t as transparent as a bank such as Triodos.

“If you particularly want to switch to an app-only bank, Starling appears marginally more engaged than the others on ethical issues,” says Ethical Consumer’s website.

Another option is a building society because they are owned by members, not shareholders. The biggest, Nationwide runs a number of current accounts.

Meanwhile, some credit unions offer current accounts. To find one near you, go to findyourcreditunion.co.uk

Moving your bank account is now quick and easy – the industry’s current account switch service has taken away a lot of the hassle.

Sort out your savings

A lot of the above also applies to savings accounts. The good news is, there’s much more choice. There are lots of building societies, including Ecology, which uses savings cash to fund environmentally friendly mortgages. It offers several accounts, including easy-access and regular-savings paying 0.1% and 0.8% respectively.

Triodos Bank has a range of accounts including a junior cash Isa (for those saving for a child) currently paying 1.5%.

Charity Bank lends to charities and social enterprises and has notice accounts paying up to 0.35%, and fixed-rate bonds paying up to 0.75%. Credit unions are another option.

Don’t forget about National Savings and Investments (NS&I) – its mission includes “providing cost-effective financing for government and the public good”. As well premium bonds it has a choice of savings accounts.

Invest well

There are a huge number of green/ethical/sustainable funds. Which you decide to put your money into will, to a large extent, come down to personal taste and how much risk you’re willing to accept.

“With more choice than ever, and performance stacking up well against traditional funds, there’s little reason not to choose a sustainable fund for your Isa or other investments,” says Lisa Stanley, the co-founder of ethical money website Good With Money. Her site’ “good investment review” lets you see which funds get the highest green rating.

For financial advisers, check out The Path Financial, BlueSphere and Castlefield, among others.

David Macdonald at The Path Financial says: “It’s important to get under the bonnet and really ask some of the hard questions to make sure a provider is as green as they appear to be.”

Use online tools

If you are investing without an adviser, there are a growing number of apps, investment platforms and the like that offer ready-made green portfolios.

Those that Stanley likes include Clim8 Invest, Circa5000 (formerly known as tickr), The Big Exchange (co-founded by The Big Issue), Wealthify’s ethical plans, and Moneybox’s socially responsible options.

Meanwhile, Sugi helps you analyse the carbon impact of your current investments and offset your portfolio.

There are also ethical investment platforms that allow people to invest directly in bonds or shares issued by charities and businesses. They include Ethex and Abundance.

Move your pension

There’s an estimated £2.6tn invested in UK pensions, and a chunk of it funds industries such as fossil fuels and weapons. But there are things you can do to make your retirement fund more eco-friendly.

Most workplace pension schemes automatically put members into a “default fund,” which may, or may not be, very (or at all) green. But many offer an ethical or sustainable fund option, and staff can opt to pay some, or all, contributions into that. If it’s not clear what the deal is, talk to the trustees of the scheme.

The good news is that during the last couple of years, a number of big UK workplace pension schemes have taken action – for example, by setting net zero carbon emissions targets for their holdings. This will see them moving away from investments in polluting companies.

Go for a greener insurer

Insurance can be tricky in environmental terms because there might be several companies involved in a policy. A comparison website can find youa provider, but the policy may be underwritten by a different company.

Ethical Consumer says insurers with “better” climate change policies include Zurich, Axa and Aviva. The latter plans to be net zero by 2040.

Stanley says: “On the smaller side, Naturesave offers home, travel and business insurance, donates 10% of its annual home and travel insurance income to charity, and plants a tree for each new policy issued.”

Be aware that the Co-op sold its insurance underwriting business at the end of 2020.

Green mortgages are go

A growing number of financial firms are launching mortgages that incentivise buying or owning an energy-efficient home by offering borrowers more favourable terms than come as standard. That usually means either a slightly lower interest rate, or a cashback payment when the deal is taken out, or both. Some of these loans are restricted to people buying a new-build property.

Lenders offering such deals include NatWest, Barclays, Nationwide and Leeds building society, with more coming on board all the time.

Aside from the above deals, building societies are a better bet generally when it comes to mortgages due to the fact they lend mainly in the housing market rather than other more unethical sectors, says Ethical Consumer.

Ecology building society specialises in home loans for properties and projects that have a positive environmental or social impact, such as certain self-build and renovation projects.