How do you make it easier for people to invest their savings in climate-friendly funds that help build a healthier planet?
Mary Stevens12 Nov 2018
Positive investing means putting your savings into funds that contribute to building the world you want to live in.
You’d imagine that it presents a great opportunity to encourage the kind of behaviours and technologies we need to keep global arming below 1.5°C – and avert climate chaos.
Unfortunately, positive investment isn’t straight forward at all.
I spoke to Michael Hilton, author of The Greener Good blog.
Michael is concerned about climate breakdown. He wanted to be sure that the money he was looking to invest would be part of the solution, not the problem. But despite his relatively extensive knowledge of environmental issues, the task far from simple.
Overall the whole process felt messy and disappointing.Michael Hilton
What were your aims?
I was looking to put away £5000 as a medium-term investment. I was happy to take a bit more of a financial risk and was also looking for a bigger return than if I just put it in an ISA. But above all I was looking to put it in a fund that would build the world we want.
I know a lot of ethical investment funds just do negative screening — no arms or tobacco for example — and I wanted something different. I wanted my money to be actively doing good.
Where did you start your research?
I started where a lot of people do, on moneysavingexpert. This was great for general investment advice but I only found 2 paragraphs on sustainable or ethical investment and nothing that could help me.
I also talked to family and friends about my options — but again, no one was able to offer specific advice on positive investment.
Where did you go to ask about positive investment?
I found the Ethical Consumer index. But the detail of the index is only available to subscribers. And I couldn’t tell exactly what they’d based the ratings on, and whether their priorities were aligned with mine.
I also looked at the opportunities for investment and savings accounts with the providers I was already familiar with: Triodos, Charity Bank, Nationwide, Ecology Building Society. The options were OK — but there was very little in the higher risk, positive investment space.
Nothing felt exciting or pioneering. The fees also felt high and I was concerned about the way Triodos uses RBS as its clearing bank. It felt like their hands were tied. [ed. Triodos is explicit about this issue on its website, explaining how limited the options are for them].
I did ask Nationwide whether they could provide any financial advice, as I have a current account with them, but the next available appointment was in 6 weeks, and even then the advisor did not have ‘specialist’ expertise.
What did you do once you’d ruled out investments with mainstream savings providers?
I started to investigate individual funds. For example, I knew about Generation Investment Management, because of the Al Gore connection [ed. GIM LLP was founded by Al Gore in 2004, who is still the chair of the advisory board]. But I couldn’t figure out how to actually put any of my money into it.
I also looked at WHEB Asset Management as I’d come across them in a professional context previously. I had the same issue here — and wherever I looked.
I came across Impax Asset Management, via a tip-off from a relative (they hadn’t appeared in web searches). I liked their Environmental Leaders Fund, but again, I couldn’t figure out how to get into it.
At this stage I started to try to figure out whether I could work backwards. Could I find the platforms that could help me place an investment?
I went back to Moneysavingexpert.com. There were about 5 different platforms they recommended — Cavendish online, Aviva, AK Bell, a couple of others. They were all charging different amounts and the website really came into its own here. In the end I did work out how to place the investment with Impax via one of these.
I also looked at the newer app-based platforms (Nutmeg, Wealthify, Evestor) but all of these are just passive funds (index funds that track the overall performance of eg the FTSE 250) and they don’t have any model to do the due diligence on the underlying funds.
What surprised you the most on this journey?
Just how difficult it was. And how complicated it was to put money in a fund, even if you found one you wanted.
I can’t believe there isn’t a good specialist website that has a good ranking system and simple guidance for how to do it. Ethical Consumer didn’t feel expert enough, it didn’t seem appropriate to apply the same methodology to investments as to a toaster or a pair of jeans.
There are some rankings, and some specialist platforms out there such as Ethex, or the Good Egg mark. Did you come across any of these?
No. I did come across 3dinvesting, but I found the website tricky to use.
What would have helped you?
I didn’t want a financial advisor conversation. That would just have been another load of fees.
It would have been great if there was an organisation with some credibility putting something out there. A detailed moneysavingexpert section on sustainable investment, for example. Doing for positive investment what it does for insurance, or savings or pensions.
What advice would you give someone wanting to do the same?
It’s hard to know. Obviously I can’t give financial advice. Starting at the end point didn’t really help; even if it did provide a solution in the end I don’t know if it was the best one.
Some peer networking might have helped; blogs or friends who’d done the same thing. But overall the whole process felt messy and disappointing.
Was there anything else you learned from this experience?
It’s important to know the difference between the sustainable funds the big providers offer, and real positive investment. In most cases “sustainable” just means a few exclusions of guns, alcohol, tobacco – often not even fossil fuels!
I’m also concerned about the growing dominance of passive funds, especially in the newer app-based services; it removes any leverage that individual investors may have.
Find out more about Friends of the Earth's project to help women get together to learn how to do good with their money, get in touch or read about #OwnIt below.