A guide to carbon divestment for your personal finances

With climate change posing a clear and present danger to the health of the planet, we need to take all possible action to avert climate catastrophe.

Our new campaign focuses on switching your current accounts, savings accounts, cash ISAs and investment funds away from companies still funding fossil fuel projects.  To make maximum impact, switching into accounts which actively support new renewable energy projects is best.

The good news is that ditching those that support the fossil fuel industry and switching to positive alternatives has never been easier. 

Below we list some of the most innovative institutions actively working in the transition away from a fossil-fuel economy.

Divesting your savings accounts and cash ISAs

For those looking to switch a savings account or cash ISA there are three banks that actively invest in renewables:

Triodos Bank

Triodos has ethical investment policies that support low-carbon initiatives, and  publicly disclose their investments – a great practice for a sector that is resistant to openness and accountability. 

Triodos offers financial services to a range of projects including organic food and farming businesses, renewable energy enterprises, recycling companies and nature conservation projects. 

Charity Bank

Charity Bank also has ethical investment policies, and publicly disclose their investments in an annual ‘loan portfolio report’ which includes a couple of renewable energy projects.

Charity Bank only lent to charities, social enterprises and organisations with a charitable purpose, and stated that it conducted a social impact assessment for each loan.

Ecology Building Society

Ecology Building Society focuses its lending on projects that offer the greatest gains in terms of carbon reductions and environmental impact, with its ethical lending policy prioritising: sustainable housing practices, sustainable lifestyles, sustainable economic activity, and other ecologically positive projects and ventures.

Ecology offer a range of savings accounts.

Other building societies and mutuals 

For more widely available savings accounts and cash ISAs we recommend Nationwide Building Society. It is a mutual (a type of co-operative) and invests in housing stock rather than fossil fuels.

Visit our guide to ethical savings accounts >

Visit our guide to ethical cash ISAs >

Divesting your current account

Divest Your Current Account

Triodos Bank, is our Best Buy for current accounts. It launched its current account in April 2017 claiming that it is "the most sustainable personal current account ever brought to the UK market." 

Recommended buys include:

Co-operative Bank states its support for renewable energy organisations alongside a commitment not to provide banking services to the fossil fuel industry. 

It has, however, recently sold many of its renewable-energy assets to raise cash, and does not control the hedgefund investments of some of its owners. 

No building societies offering current accounts are making a point of supporting renewable energy, but neither do they invest in fossil fuels.

Nationwide offers current accounts and avoids investing your money in the most controversial business areas. You may have a local building society too.

Visit our guide to ethical bank accounts >

Divesting your investment funds

WHEB & Triodos came top of our score table in our guide to ethical investment funds and also scored highly according to 3D Investing’s ratings. Both companies focus exclusively on positive and sustainable investing and neither invest in the fossil fuel sector.

Castlefield scored well according to our ranking and its B.E.S.T funds have strict exclusions criteria, including no investments in fossil fuels. Its financial performance has been less good recently though.

Many individuals choose to invest in ethical funds via an independent financial advisor (IFA). See our guide to choosing an ethical IFA.

Read our guide to divested investment funds

Read our guide to impact investing

Divest your direct investments

Direct ethical investments allow individuals to create change by playing a part in supporting, often smaller, environmental or social projects. Investments normally take the form of loans or shares of some type, and there is always a risk that you may lose the whole of your investment if the project fails. It is advisable that you seek financial advice before making a large investment. There are now ethical ISA's available for you to be able to invest in some of these projects tax free.

ETHEX

ETHEX, the positive investments website, collates and lists most of the best positive investment opportunities that come up in the UK. 

In May 2016, for example, it listed nine renewables projects of which seven were solar arrays and two were hydro schemes. Although it covers more than renewables and looks at savings as well as investments, renewables have been where the bulk of its work has been to date.

One of its great virtues is that that it provides a ‘health check’ of projects before they appear on the site – thus removing extremely risky ones from the mix. 

Minimum investment varies from £1 to £2000 depending on which project you invest in, and you can sometimes pay online.

Ethex also runs the Lendahand brand that invests in

Energise Africa

This is partnership between Ethex and Lendahand that cccelerating progress towards the achievement of universal access to affordable clean electricity.

They focus on solar power installations across Africa.

Abundance Investment

Abundance Investment specialises in Uk based renewable energy projects and was the first crowd-funding platform to be regulated by the FCA. Individuals are able to deposit money online and then invest in specific projects according to their preferences. Abundance has recently launched the ability to hold Abundance investments in a Self-Invested Personal Pension (SIPP) and investors

can apparently view how much electricity their projects are generating, depending on how windy or sunny it is. Investors from anywhere in Europe can invest in Abundance projects, and you can invest as little as £5 and can complete all transactions online.

Triodos

Triodos (mentioned above) also run a crowd funding platform allowing you to invest in a range of environmentally sustainable projects.

These are usually long term investments (up to 18 years) with a return of around 5% per annum.

Energy4All

Energy4All is a not-for-profit social enterprise dedicated to expanding the number of renewable energy co-operatives within the UK. It is different from the other schemes, in that it is owned by the co-operatives it assists and is a vehicle for them to offer mutual support to each other. It lists current share offers on its website for ethical investors.

Sharenergy

Sharenergy is a not-for-profit organisation that helps communities find, build and own renewable energy generation throughout the UK. The website also advertises share offerings for community renewable energy schemes.

Repowering 

Repowering London helps develop community (solar) energy projects in London, periodically listing on its website those that are seeking funding from ethical investors.

Visit our guide to Innovative Financial ISAs >

Pensions

There are 4 basic (sometimes overlapping) options for pensions, and there is usually an ethical pathway in each.

Some options are more ethically sound than others and none are without their own risks in what is a very complicated sector. 

Perhaps more than with any other type of investment you should consult a financial adviser before taking out any type of pension or moving your money around pension schemes.

1. Many people are already in an occupational pension scheme. These tend to be very traditional in their investment strategies and heavily invested in fossil fuels. However, most financial advisers are agreed that, if you are lucky enough to be in one of these, staying put makes financial sense.

Shareaction is among a number of groups that can help you lobby your fund manager for carbon divestment.

2. Most employees in the UK who are not already in a pension scheme will be auto-enrolled into a scheme in the next two years, thanks to a new government scheme.

Ethical Consumer has worked with the ethical financial advisory group Castlefield to set up a carbon divested auto-enrolment pension scheme suitable for smaller organisations.

The scheme is administered by the Aviva Group and is tied to the Liontrust Sustainable European Growth fund.

The Liontrust (previously the Alliance Trust) Sustainable European Growth fund was our recent Best Buy for fully carbon divested investment funds. It discloses its full list of investments, it does not appear to engage in tax avoidance, and it does not invest in nuclear weapons. We awarded it an Ethiscore of 9.

Also Aviva came top of Shareaction’s recent ethical ranking of auto-enrolment pension providers. It was the only provider which had committed to measure and disclose the greenhouse gas emissions of its entire investment portfolio.

This option may also work for some larger organisations as well.

3. You could also have a ‘private fund’ or personal pension (SIPP) as well as either or both of the above, but if you are not an experienced investor it is always better to speak to a financial advisor first before you do this. A SIPP can be linked to an existing ethical investment fund or even to a carbon-divested fund.  For example Abundance investments has also been working in this area with renewable energy projects and there are others mentioned above.

4. You could also try 'off-piste' saving - bundling a number of different options, such as property, direct investments and ISAs (as mentioned above) - but this comes with more risk. Financial experts are divided on the issue, but many say that property investments alongside ISAs will give you greater options in retirement. If ethically managed, this could be an attractive ethical option too but you should always work with an ethical financial advisor to get the best arrangement for you.