As individuals, we can all do our part to reduce our carbon footprints. Whether that is by choosing an alternative method of travel or integrating more sustainable habits into our purchasing decisions.
However, your impact on the environment goes further than just the day-to-day interactions you have with the world. For example, the places where you store your money or invest your savings can also make a huge difference.
What is the issue?
A large part of the general population is unsure of what happens to their money when they put their money into savings accounts or pensions with mainstream financial firms or high street banks. As these establishments often have loose selection criteria for what they invest in, it might not align with the moral and societal goals of the end financial consumer.
These consumers would benefit from learning more about ethical investment opportunities.
How do your investments contribute to your carbon footprint?
People simply are not aware of exactly why their investments might be indirectly generating a high carbon footprint for them. This happens when a person does not fully investigate how their savings are being distributed and which projects they are indirectly funding. Therefore, the financial institution takes this money and looks for the right investment profile with little consideration to the environment. These funds then have the potential to be invested into projects with environmentally damaging practices such as petroleum production and waste disposal.
That is where an investment fund would provide more transparency to the end-consumer than traditional methods of saving.
What is an investment fund?
An investment fund is a pool of money used to invest in companies or assets with the aim of making financial returns.
Investing your money into investment funds allows you to easily support a wide number of companies. Whilst this does not totally negate the risk with investing, it does allow you to spread the risk across a wide range of different entities. This reduces the negative impact if a company performs poorly as it will be balanced out by the performance of the other companies.
Ethical investing can apply to your pension pot too. By switching your pension to a more ethical fund, it ensures that your retirement money will be used to invest in things like decarbonisation projects, ethical start-ups and so on, and avoid things that may be unpalatable to you for example fossil fuel extraction, arms manufacture and trading, harmful agricultural practices, and unsustainable forestry
The result of which gives you some assurance that your money is being used for positive purposes.
Consumers also have the option to switch their day-to-day banking provider to a more ethical entity. This has led to the rise in popularity of ethical alternatives who use their financial position to promote sustainable objectives.
How to choose an ethical investment fund or trust?
Choosing an investment fund can be slightly overwhelming due to the large variety of investment options that are available.
- Examine the selection criteria: This can be done by looking at its stringent exclusion and inclusion policies which details the sectors that it will not invest in and which ones it will.
- Check the owner: It is wise to check that the company which owns the fund also has ethical practices.
- Inspect the performance: Check the historical and predicted financial performance of the fund to ensure the best chance of a positive return.
- Ensure full transparency: Explore how transparent the fund is with disclosing all of its investments to provide assurance that your money is being distributed ethically.
The carbon footprint of investment funds
Due to rise of public awareness towards the impact that the climate crisis is having on our environment, there is increasing pressure on investment funds to disclose the carbon emissions of their portfolios.
Since 2014, the Montreal Carbon pledge has called for all investment funds to measure and publicly disclose the carbon footprint of the companies in their portfolios every year. The benefit of this is that it allows funds to identify the priority areas for carbon reduction and benchmark carbon results against among different sectors.
If you are interested in finding out which ethical trust is best for you it is heavily advised that you conduct your own research. A good place to start would be to review comparative reports, such as this one here.
Investing in the right place will make a positive difference, but ultimately it is down to us to make the change towards sustainability in order to create a greener future. Now is a good time to assess your net zero aspirations and talk to us about how we can help achieve them. Our team of renewable energy experts are available to provide Net Zero consultancy and renewable (Solar, EV, battery) quotations alongside installation operations and maintenance support to asset owners.
This article is for your general information and is not intended to address your particular requirements. In particular, the information does not constitute any form of advice or recommendation by EvoEnergy and is not intended to be relied upon by users in making, or not making any investment decisions. Appropriate independent advice should be obtained before making any such decision.