How millennials can be ethical in money matters
When it comes to ways we as individuals can make the world a better place, our investing and saving habits might not be the first thing to spring to mind.
After all, we’re frequently told that if we want to save the planet then we should be avoiding plastic straws or going vegan, not considering our Isa options (Individual Savings Account, you can read more about them here).
Nonetheless, along with doing all the practical lifestyle things, there are some pretty easy ways we can become more ethical in our saving and investing too.
The first way to be responsible in money matters is by looking at who you bank with. Admittedly it’s not something that most millennials sit around and ponder, but how much do you really know about what banks do with your money once it’s been deposited into an account?
Increasingly websites such as ethicalconsumer.org are attempting to create ranking systems for financial institutions based on their ethical practices (or lack thereof).
They look at factors such as who the banks are lending to, their social governance practices and their environmental policies.
With Ethical Consumer, some specific ethical issues are highlighted, for example banks who finance nuclear weapons or provide services to companies that test on animals.
The Co-operative and Triodos are currently the only two self-professed “ethical banks” in the UK, but it is likely that more will move into the space.
Monzo, which we reviewed here, is currently ranked one of the best app-based bank in terms of ethical practices. Next time you go to open an account or get a loan, it’s worth considering where your money could really be going, and maybe opt for one of the more ethically-conscious options.
If you’re a young investor, it’s likely that you already think about “ESG” (Environmental, Social and Governance factors) in your investment decisions, even if you’ve not heard that term before.
A survey by Schroders found that 52% of millennials often or always invest in sustainable investment funds, compared to 40% of Generation X and 31% of Baby Boomers.
However, if you’re new to the concept, this handy responsible investing primer could help to break down the basic concepts.
Effectively an ESG fund is a fund that will only hold assets that meet certain environmental, social and governance standards.
They’re therefore appealing to those who don’t want to cause harm to the environment while trying to make a return on their money.
If you have a Stocks and Shares Isa, chat to your provider about ESG options available.
The last tip I have for being conscientious over your money matters is to check where your pension is invested.
Most of us will be enrolled in some form of workplace pension, and unless you’ve chosen otherwise, you’ll be in whatever the default fund is that your scheme has selected.
By asking your employer, you’ll be able to find out what fund that is, what the fund’s stated investment principles are, and whether it has signed up to the UN-backed Principles for Responsible Investment.
Lots of providers, including NEST, have an ethical fund as an option for your pension savings to go into, and from October 2019, trust-based pension schemes will have to consider ESG issues in their investment decisions, and publish their related policies.
If you find that your pension scheme doesn’t have an option that covers enough ethical bases, then you’re entitled to stop paying into that scheme and instead open a personal pension more tailored to ESG stuff.
Read more: Is investing for me?