Greener Campaigns

Green and Ethical Student Finance

If you buy fair trade goods, believe in human rights or are concerned about the environment and climate change – then opening an ethical bank account is another way of putting your money where your mouth is.

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What is Green and Ethical Investment?

Green and ethical investment, also known as socially responsible investment (SRI), ethical investment and sustainable finance, describes financial services that combine financial objectives with concern for social, environmental and ethical issues.  Green and ethical investment offers a means by which consumers can advance positive social and environmental goals while achieving financial returns.
 
Useful terms:

Ethical Screening – the selection of stocks and shares in investment portfolios on ethical, social, or environmental grounds, either by excluding unacceptable shares or actively selecting shares in companies with superior social or environmental performance.
 
Shareholder Influence – seeking to improve a company’s ethical, social and/or environmental behaviour as a shareholder through dialogue, support for responsible management and voting at AGMs.

Green and Ethical Investment Approaches: Some examples
Broadly speaking there are four approaches to green and ethical investment which different funds can combine in different ways. Any or all approaches may be right for you.

1. Negative Screening - The most commonly recognised form of ethical / SRI, negative screening involves avoiding companies that do not meet the ethical standards by which the SRI fund is run. A number of ethical funds, for example, will not invest in tobacco production.

2. Positive Screening seeks to invest in those companies with a commitment to responsible business practices, products and/or services. This commitment can come in a number of forms, such as the adoption of more sustainable environmental principles or a strong programme of community involvement and ethical supply chain management in developing nations. Funds might invest in areas like environmental technologies.

3. Dialogue and Engagement approaches are applied by some fund managers, to encourage more responsible business standards, when there is a strong business case for change. This may not alter stock selection and mainly takes the form of dialogue between major investors and companies, and may extend to voting practices. This approach can be done separately to or in combination with screening. Fund managers will engage on areas such as inappropriate remuneration and climate change. This approach is also known as active shareholding.

4. Integration refers to the explicit inclusion by asset managers of ethical, social and governance risk into traditional financial analysis.

The issues

Before you open a new student bank account, if you want to find out about your current bank’s green and ethical credentials, or if you’re getting a credit card or insurance cover you should consider the following:

• Who does it lend to?

Banks don’t just lend money to current account-holding customers, they also lend to large corporations, public institutions and even governments. Would you approve if your bank was lending money or providing insurance cover to a company with a poor track record on human rights or one manufacturing arms for use in war zones, for example?

• What is its stance on climate change and the environment?

Financial institutions have an impact in these areas, not just in terms of who they lend to or invest in, but how they run their own operations. Has your bank pledged to go carbon neutral? Does it offer any green products to its customers?

• What is in its equal opportunities policy?

A lot of people believe that equal opportunity in the work place is now the norm, but there is still a massive pay gap between men and women doing the same jobs. Some equal opportunities statements do the bare minimum and don’t take key issues like sexuality or disability into consideration. Most financial institutions publish policies online so it can easy to ascertain their equal ops values.

• Is financial inclusion on its agenda?

There are an estimated two million adults in the UK without even the most basic bank account. Is your bank doing anything to address this situation?

• Does it treat its customers responsibly?

Does your bank, credit card provider or insurance company take care in how it targets and markets its products? Does it offer assistance to customers in financial difficulty? Does it provide an advice or educational service to promote financial literacy?

The green and ethical options

If you’re looking for a new financial provider or are dissatisfied with your current one and looking to switch to an ethical option, see the links below for further information:

EIRIS is a leading global provider of independent research into the environmental, social, governance (ESG) and ethical performance of companies.

An independent, not-for-profit organisation, EIRIS has produced YourEthicalMoney.org, to provide objective, independent information on green and ethical finance to consumers.

People and Planet: The Ditch Dirty Development campaign aims to shift financial support away from fossil fuel extraction and exploration towards renewable energy. Since the credit crunch, the lines between banks and the government have become blurred. People and Planet are focusing their campaigning efforts on both RBS and the UK Treasury.

For more information about the People and Planet Ditch Dirty Development campaign, click here.