Discover how there’s more to going green than simply recycling and turning off the lights.

People like you currently have around £4 billion invested in the ethical market in the UK. These investment funds operate on the principle of not investing money in any enterprise that would harm the environment, people around the world, or animals and wildlife – and some actively encourage progressive green companies. The idea is that the money you deposit with the institution is invested only in green firms.

Most financial institutions offer a few ethical or green investments, pensions, life insurance, and savings, and some also offer green mortgages. As demand for green and ethical products grow, more and more are becoming available. These investments are called SRI’s (Socially Responsible Investments) or Ethical Investments.

Pay attention to where the money you put into an investment fund goes and how it’s being used. For example, if you invest in an ethical unit trust, your money is pooled with that of other investors and used to buy shares in companies that have a good track record of looking after their employees and the environment. As in a standard unit trust, you make money as the values of the shares grow.

You can choose to invest in light green or dark green funds. The greener the fund, the stricter the rules governing what that fund can be invested in and the more green the companies invested in – for example, a fund where the only rule is that it won’t invest in firms involved in animal testing isn’t as green as one which won’t invest in firms involved in animal testing or companies that produce harmful pesticides.

The Ethical Investment Research Service (EIRIS) is a charity that provides independent research into the behaviour of thousands of different companies. The Web site at www.eiris.org has a directory of ethical investment advisers and a frequently asked questions section that gives you useful information on ethical investment. You can check with it to see how green companies are before you decide whether or not you want your money invested in their operations.

Greening your Pension

The most likely way for most people to invest is through their pension funds. Some of these have ethical policies and some don’t, but trustees for UK company pension funds have to tell you whether yours has such a policy and if so what it is. Ask for a copy of the Statement of Investment Principles relating to your fund and find out what the ethical, social, or environmental considerations are.

You can have an influence on how your pension fund invests your money and can transfer your pension contributions to one of the socially responsible funds.

If you don’t belong to a company pension scheme and are setting up your own stakeholder pension or personal pension plan, shop around for a fund that meets your ethical principles, but be warned that there aren’t as many to choose from as with regular pension funds. Try the big pension providers and take advice from an independent financial adviser who specialises in ethical investments. Get good financial advice before making any decision about where to put your money.

Staking your money on ethical stocks

If you hold company shares directly, ask those companies about their business ethics and find out if they produce a social or environmental report.

You can invest in ethical index funds on an ethical exchange, and by buying shares and investing in companies with strong corporate social responsibility, you can encourage and support them. Another way to make businesses greener is to buy shares in companies that need to change so that you can attempt to have your voice heard and influence the company’s behaviour through shareholder meetings and your voting rights.

The FTSE4Good is a stock market index listing firms that have particularly ethical trading policies. Some investment funds track that index – so if the value of the shares in the index as a whole goes up your investment is worth more. Ethex is an ethical stock exchange where investors can buy and sell shares in ethical companies such as Fairtrade companies.

The value of your investments can go up or down – there are no guarantees. Even if a company’s shares have done well in the past that doesn’t mean that its shared values will go up in the future. You’re taking a gamble so don’t gamble with money you can’t afford to lose. That goes for any stock market investment – ethical or not. And ethical investments don’t always give you as good a return as non-ethical ones. Shares in companies that manufacture drugs, tobacco, and arms often perform better. You may have to pay for green principles.

Investing in insurance

You can even find ethical insurance policies if you look hard enough. Talk to your current insurance provider, and shop around by calling other companies, enlisting the services of an insurance broker, or contacting the Ethical Insurance Research Service (EIRIS).

An ethical insurance firm may fund environmental or animal welfare projects. One example for pet lovers is Animal Friends Insurance (www.animalfriends.org.uk), a not-for-profit organisation that uses any money it makes to help animals in need around the world. Examples of some of the projects it has helped are The Gambia Horse and Donkey Trust, the Born Free foundation, and The Philippine Dog Rescue, as well as various projects in the UK.

Choosing an Ethical Institution

When it comes to investing your money you have to decide which financial institutions and products match up to your own standards on what’s green or ethical. You may want to save through a mainstream high street organisation and be more interested in the countries it invests in than whether or not it deals with firms that use child labour, or you may prefer a lender that doesn’t deal with firms that pollute or damage the environment. You may want to shun the big banks and building societies in favour of the kinds of organisations that offer special investments to people with particular faiths and beliefs or invest at a local level. Shop around, ask what each organisation’s ethical or green policy is, and consider all the alternatives before coming to your decision.

© John Wiley and Sons Ltd.

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