Finance

The below research suggests banking and investing alternatives for UK based GCC members. For more detailed information on this topic, see our Finance and Funding resource.

Alternatives to Fossil Fuel Finance

The financial needs of every arts organisation will be different, and each of our members will need to seek out the low-carbon financial products that are right for them, working together with their pension providers and more qualified financial advisors.

However, when solely considering the environmental impact of financial institutions and products, Ethical Consumer have some helpful guides to help sort the genuine commitments from the greenwash. 

For day-to-day banking and cash holdings, the top recommendation from Ethical Consumer is Triodos Bank. This ethical bank actively avoids investments in fossil fuels and other harmful industries, and instead has a strong emphasis on investing for the public good. However, some of its banking products do require an annual fee.

Other banks recommended by Ethical Consumer include Nationwide, which is a mutually-owned building society with no direct investment in coal, oil, gas, tobacco, arms, alcohol or gambling; and Cumberland, another mutual building society without significant fossil fuel lending. Ethical Consumer do also recommend The Co-operative Bank for its strong ethical investment policy (avoiding fossil fuels and other harmful industries) but they also note that the bank is currently owned by a number of hedge funds who are far less discerning in their investment policies. They suggest that anyone signing up to the Co-operative Bank should also join the Customer Union, set up by Co-operative Bank customers to monitor the bank’s behaviour, ensure it maintains its ethical lending policies and look for ways to shift the bank to a more ethical ownership model in the future.

For pensions, Ethical Consumer strongly recommends choosing a provider and fund that is transparent about where your money is invested, and willing to put together a portfolio for you that’s free of fossil fuels and other problematic industries. Ethical Consumer’s top UK choices in this sector are NEST (the not-for-profit government-backed pension scheme), which has good transparency and investment principles, and Royal London, again for its openness about investment options. They also recommend Aegon, Aviva, Legal & General, LV= (Allianz), Prudential (M&G), Standard Life, and The People's Pension, as providers who should be able to put together a fossil-free investment package.

However, to genuinely decarbonise your pension it’s important to have a proper discussion with your pension provider and ensure that any “ethical” or “sustainable” fund they recommend is genuinely free of investments in carbon-intensive sectors and other unethical industries that you may wish to avoid, such as tobacco or arms. Many supposedly “sustainable” funds have fairly weak criteria and still invest in fossil fuels, so it’s always worth checking!

For more details on these and other banking and pension options, it may be worth subscribing to Ethical Consumer Magazine (which also has environmental and ethical ratings for a huge range of other types of products and services).

They also update their research every couple of years. The information here was taken from
their 2020 research cycle, so it may be worth checking to see if newer versions are available.

Other investments

There are a growing number of investment platforms such as Abundance and Ethex that will invest your money in socially-positive projects, such as renewable energy or social housing. These can be a great way to support positive alternatives while still making a financial return (although the risks and rates of return may vary greatly between projects and you should always get financial advice before making any significant investments on these platforms).

My pension provider says their “green fund” doesn’t divest entirely from polluting industries, they prefer to choose “best in class” companies and influence the market…

People have been doing this for decades and it’s not made the difference we need in corporate behaviour. It has driven some improvements in reporting and helped to stop a few polluting projects, but has created nowhere near the change we need in these company’s business models or on-the-ground operations. The fossil fuel industry isn’t going to change itself, at least not in time to avoid climate breakdown. We need to take our money out of the worst activities and put it into solutions.

Where should I start?

• Assess your current investments and which bank you use.

• Investigate switching to a more ethical bank, especially if your current bank is one of the more carbon-intensive lenders mentioned above.

• Talk to your funds manager/pension provider about options available with your existing pension providers/partners. If they don’t offer anything low-carbon enough then investigate other options. If you’re in the UK, then the Ethical Consumer suggestions above should give you some good starting points.

• Seek professional financial advice before making any major changes to your financial position or investments. While many ethical investments do, in fact, perform as well (or better) than fossil-fuelled funds overall, and may well become a safer bet than oil, gas and coal as more climate regulations kick in around the world, not all ethical funds will perform equally and there are risks and challenges with every investment. It’s important to understand all the implications of this before making a final decision.

• Maximise the impact of these changes by letting your stakeholders and partners know what you’ve done, and why.

For more detailed information on this topic, see our Finance and Funding resource.