last updated: August 2013
Banking on the big time
Ethical Investment Week takes place again this October but why is ethical finance still a marginal activity asks Simon Birch?
Do you know what your bank does with your money? And do you have any idea which companies your pension is invested in? These are some of the questions that Ethical Investment Week wants people to start asking, with the aim of making people more aware of the impact that their money can have, and of boosting the whole ethical finance sector.
Despite the recession, on the face of it ethical finance is fairing up well. About £11bn was invested in green and ethical funds last year up from £4bn a decade ago according to the latest data from sustainable investment research group EIRIS. And yet the Investment Management Association says that ethical investment funds are still niche in the sector as a whole, accounting for just over 1% of the UK investment industry.
Also the Co-op, which despite its current troubles is still the UK’s only high-street ethical bank, has a mere 3% of the current account market.
So when you can buy Fairtrade coffee and organic carrots in virtually every supermarket, why has ethical finance failed to make the mainstream?
“We don’t expect to see ethical finance mainstreamed overnight,” says Raj Singh from the UK Sustainable Investment and Finance Association, the group behind Ethical Investment Week. “It takes time but the market is heading in the right direction.”
Mark Campanale, who is a key player in the UK’s ethical investment sector and founder of the pioneering ethical investment clearing house socialstockexchange.com, offers an up-beat view: “For people who are interested in ethical finance, the sector is much better organised than it was 20 years ago with much better established financial institutions such as Triodos Bank, Shared Interest, and investment funds such as the Jupiter Ecology Banking on the big time fund.”
The ethical banking sector is also currently enjoying a boom thanks in part to the sterling work of the Move Your Money campaign which has seen almost 2.5 million bank accounts moved over the past 18 months from the disgraced and frankly dodgy big High Street banks to more ethical alternatives.
“Ethical finance is only marginal if you let it be. As a consumer you have power over your money and you can choose where put it,” says Laura Willoughby from Move Your Money. “The more that people don’t act and change banks, the more the big banks will get away with treating their customers badly and not think about the ethical and environmental impact of where they’re investing your money.”
So much for the good news. The bad news is that there’s a big appetite for ethical finance which is currently not being met. “Research shows that the popularity of ethical finance is theoretically strong with 44% of UK adults wanting at least some of their investments to take green and ethical considerations into account and 5-10% wanting all their investments to do so,” says Ethical Consumer co-editor Rob Harrison.
So what’s going on here? “Many mainstream financial advisers still aren’t comfortable about having a discussion with their clients about ethics and many still take the view that ethical finance is still only for open-toed sandal wearing hippies,” states Lisa Hardman, a director at Investing Ethically, an Independent Financial Advisor. “Plus the financial industry is still dominated by
white men in grey suits who just aren’t interested in these issues.”
More complicated than coffee
Hardman also believes that many people are still mystified by money and finance and when it comes to finding out about where their pension is invested, well that’s just too boring. “Going into a supermarket to buy a jar of Fairtrade coffee is so much easier than having to think about pensions and insurance policies,” says Hardman.
However understanding where your pension is invested is vital as Huw Davies from the ethical bank Triodos explains:“While something like Fairtrade helps improve lives for producers in the developing world because it’s interconnected with all areas of the economy and life, finance has a far wider impact so choosing ethical finance is one of the most powerful things that you can
do as a consumer.”
Ethical Investment Week runs from 13-19 October
Register on the site to receive our free monthly email newsletter and keep up-to-date with all our research and campaigning.
Ethical Consumer on Google+