Header photo courtesy of Extinction Rebellion
The Extinction Rebellion has captured headlines in recent weeks with some notable but questionable protest activities.
It has now targeted London’s financial centre the City of London, with protesters gluing themselves to the entrance of the London Stock Exchange.
The protest group claims: “The global financial industry is currently enabling climate and ecological destruction on an almost unimaginable level, and a considerable proportion of this money flows through London. ‘Business as usual,’ especially through the toxic finance system, will kill all life on this planet.”
It goes on to add: “The world's top banks have poured £1.5 trillion into fossil fuel financing since the Paris Agreement just over 3 years ago, with financing on the rise each year. There is [sic] countless billions more funding projects which lead to rainforest destruction, industrial agriculture and other ecologically catastrophic projects.”
While its cause of saving the planet from ecological destruction is admirable, its messaging and activities are a lacking in constructive ideas for people, other than promoting the use of civil disturbances.
It would be helpful if they articulated some positive ways people can act to change the financial system and the way money is used for the better.
But it won’t do that, so here I am to suggest some ways to get started with saving the world by using your own money.
It is in fact quite possible for us to save the world without even getting up from our sofas. If enough of us start making activist ethical choices, not just with our Isa investments, but also with our pension holdings and even banking choices, then we can change the world.
After all, quite a lot of that £1.5 trillion is actually just cash being redirected by banks on behalf of normal people like you and me.
ESG is the buzziest of buzzy catch phrases in modern finance. Fund managers love talking about it and how essential it is.
The acronym stands for Environmental, Social and Governance. Each bit comes with its own implications but in totality it adds up to a matrix of decision making that filters out the nastiest businesses out there.
The appetite for this kind of rigorous approach to stock picking is growing, and many a fund manager will delight in telling you that actually its all good for business anyway.
But if consumer investor demand for ESG actually took off in a meaningful way, many more retail investment funds would be driven to use the framework to filter out destructive companies.
As for what to invest your money in, it requires a bit of research to find funds that are already doing serious ‘ESG’ and performing strongly.
Moneywise recommends the Rathbones Ethical Bond, for starters, but this is a conservative approach fund.
Investing using tracker funds is trickier in this area. Many will simply take a selection from the index you wish your money to follow and so do not allow you to opt out of investing in sectors you dislike. For example, if you were to invest in a FTSE 100 tracker fund you would quite likely end up investing in firms such as Big Tobacco and oil companies whether you like it or not.
However, movement is underway to change this state of affairs. Calls were made recently by 140 asset and wealth managers to stock market index providers to exclude manufacturers of “controversial weapons” from major indices.
Impact investing takes the theme of ESG a step further.
Where ESG looks to filter out certain firms or sectors that lack good environmental, social or governance records, impact investing looks to focus money on actively good companies, that aim to improve the world.
That is, companies that are not necessarily inherently bad are precluded too, and the funds are actively managed to invest in proactive firms.
A good example of this is a firm like Impax which has a range of funds to pick from. Another is recently launched digital wealth manager Tickr, which specialises in building impact investment portfolios through a user-friendly app.
We can go even further than your Isa contributions though. Something I harangue my friends about is for them to check what they have their pension funds invested in. Quite often it will be in a vanilla (and usually quite conservative) ‘default’ fund.
But more and more pension providers now offer the option of eco-friendly pension funds. Unfortunately for some the options will be limited. But even auto-enrolment megalith NEST has an ethical investment option.
If NEST’s millions of pension savers all opted tomorrow to transfer their savings to the ethical fund, you better believe it would make waves.
Finally, you can extend the activism with your money further than just savings and investments. Why not take a stand if you don’t think your bank behaves in an ethical way?
Banks such as The Co-operative Bank and Triodos Bank offer brilliant, ethical services, and are just waiting to accept your business.
It is well and good for the Extinction Rebellion to highlight the hand of the financial sector in some of the most devastating environmental activities the world has ever known.
But ultimately ‘finance’ is beholden to the money it receives from customers. And generally speaking, said customer isn’t some faceless top-hat-wearing fat cat. It’s you, me, your mum, your dad, all of your friends, your bus driver, dentist, postman and whoever else you care to think of.
We’ve all got pensions, Isas and bank accounts. Let’s put them to use.