"MONEY makes the world go round." So the saying goes. The
organisers of Good Money Week, running next week, want to help the
world go round the right way. But can people who, perhaps, do not
have large sums of money to invest, make any difference to the
Derek Williams, of True Potential Wealth Management LLP, based
in Newcastle upon Tyne, suggests so. The easiest place to start is
to look at any existing pension fund(s), he says. "If someone on
£24,000 a year has a modest fund of £60,000, that's £60,000 that
can be invested ethically. It's not an issue of wealth, only of how
much you really want to make a difference."
Occupational-pension funds are not required by law to have a
responsible investment policy, but they must state whether they
have Given that fund managers have to consider the long term, Lisa
Stonestreet, of Good Money Week, says: "They should be thinking
about the environmental and social issues that might have an impact
on their investments.
"We get feedback from people who manage pension funds, and they
say: 'People are not asking these questions: they're just not that
interested.' So, my advice would be: ask questions. If you need
help, consult ShareAction [formerly FairPensions].
"If you have concerns about your workplace pension fund - if it
invests in gambling, say - you can opt out, and get your employer
to contribute to your own separate stakeholder pension. But imagine
the impact it could have if a lot of people in a local-authority
pension fund, for example, instead of opting out, asked for more
"If you belong to a final-salary scheme, there's not much you
can do: the terms are probably so generous that though you should
be able to opt out in principle, you would almost certainly be very
ill-advised to do so," Mr Williams says.
"The best you can probably do is write to the trustees and ask
them what their ethical policy is, and ask them to take a more
ethical stance. But, to be honest, unless a large percentage of the
members of the scheme do the same, they will probably ignore you.
It's very doubtful that they will have an ethical policy anyway;
they'll be focused on maximising returns within risk
"If you have a personal pension, or are in a contributor-defined
employee scheme, almost certainly you can ask the fund manager to
move your money to an ethical fund."
WHEN reorganising pensions, or other finance, it is important to
get advice from an independent financial adviser (IFA). You can
search for one on www.unbiased.co.uk. "If you have just a bank
account and an ISA, you don't necessarily need an IFA. But, if you
have life assurance, or are developing an investment portfolio . .
. talk to someone who understands the field," Ms Stonestreet
Mr Williams suggests that people consult an IFA at least once.
"In 90 minutes, I can usually weigh up if I can help someone, and
how much, or if it's just a matter of pointing them in the right
direction, if they're web-savvy. In my experience, most IFAs have a
heart for the job, and are happy, at least, to signpost people."
Generally, an initial meeting with an IFA is free, he says.
IFAs should be qualified, authorised, and up to date, the
director at Moneyology, Mark Hassall, says; and the guarantee that
they are is that they are listed on the Financial Conduct
Authority's (FCA) financial services register
"To be absolutely sure, ask any prospective adviser for their
'statement of professional standing'," he says. The statement
confirms that the holder is suitably qualified, has kept his or her
skills and knowledge up-to-date, and has adhered to a code of
ethical standards. Such a statement can be issued only by a body
accredited by the FCA.
The managing director of SRI (Investment Services) Ltd, Jeremy
Newbegin, who has specialised in the ethical market for 30 years,
says: "It's not easy to find an IFA who is really knowledgeable
about ethical investment, but it's important to get one who is
Mr Newbegin was a founder member of the Ethical Investment
Association, set up in 1998: a group of IFAs committed to knowledge
of the ethical-investment market. A list of ethical advisers is
available on their website.
"Very few of them are Christians, sadly," Mr Newbegin says. He
believes that ethical investment needs to come higher on many
Christians' agendas, and sees the ethics of how we bank and invest
as a crucial issue in Christian discipleship.
Mr Newbegin admits that he once believed it did not matter "how
you invested your money, so long as you maximised the return - it
was what you did with the proceeds that mattered". His perspective
changed as his Christian faith matured, however. "I realised that
that was a cop-out, and that where we invest is actually very
"Unless people invest ethically, or socially responsibly, they
will have their money put into companies involved in gambling,
offensive advertising, potentially human trafficking. There really
should be no other option for Christians wanting to make a
THE website SRI Services, the ethical-investment hub for UK
financial advisers, suggests that the first retail ethical fund was
launched in the United States, in 1971, by Methodists who did not
want to support the Vietnam War financially. In the UK, Friends
Provident was the first to offer a fully ethical-investment fund,
the Stewardship Fund.
Instead of investing in shares from individual companies, buying
into a fund provides the opportunity to pool money together with
other investors, which is then invested by a fund manager in a
range of assets. These are usually cash (saved in a bank or
building society, for example); gilts or bonds (loans to the
Government or a private company, which usually pays a rate of
interest until the loan is repaid); or equities (shares in private
companies) and property.
The fund manager's aim is to grow investors' money and, if
required, to provide an investor with a regular income. Exactly
what the fund manager buys depends on the investment objective of
the fund. The fund manager's knowledge and experience is a crucial
factor in terms of the potential level of return on the
EVERY IFA is required by law to do a "fact find" on a new client;
so it is a good idea to ask a prospective adviser to send his or
her questionnaire, Mr Hassall says. "Some are just a couple of
pages - mine is nearly 40 pages long. It gives you an idea of how
much depth I go into."
An adviser should work hard to help a client define his or her
ethical interests (supporting green technology, or food security,
for instance); and approach - negative screening (excluding
companies with links to armaments, pornography etc), positive
screening (investing in companies whose values, or work, you
support), or active engagement (becoming a shareholder in order to
"The first thing I do is to ask: is it a matter of avoiding or
engaging, or a combination of the two?" Mr Hassall says. "I
establish attitude to risk, and ability to accept a fall in the
value of [an] investment. I explore the depth of interest in
investing ethically, and then bring the two things together:
capacity for loss, and desire for a clear conscience.
"I marry up a client with funds which align with their
sensibilities. [But] it's never going to be an exact science. And,
of course, they have to be realistic, because they do need some
To get the most out of a meeting with an IFA, there is plenty of
material online to improve one's financial literacy. Citizens
Advice's online Adviceguide provides clear guidance on
understanding pensions, savings, investments, and banking. And the
Money Advice Service website also provides clear guides to
pensions, and various saving and investment vehicles (including
Unit Trusts and Open-Ended Investment Companies (OEICs), shares,
investments bonds, fixed-interest gilts and bonds, and others).
With ethical issues in mind, Your Faith Your Finance, from the
Ecumenical Council for Corporate Responsibility (ECCR) and Quaker
Peace and Social Witness, provides a thorough online
The website Your Ethical Money offers a "one-stop shop for green
and ethical finance" which covers banking, investments and ISAs,
pensions, insurance, mortgages, credit cards, student finance, and
child trust funds. And the not-for-profit social enterprise Ethex
claims to offer "everything you need to understand and make
BANKING is now widely perceived as one of the shadiest parts of
the financial-services market. The scandals that have dogged most
of the big banks since 2008 have prompted the movement Move Your
Money, which, under the slogan "It's payback time", seeks to make
it easy for people to choose, and then switch to, a more ethical
current account, or ISA, or a savings or business account.
In the past, the Co-operative was deemed to be the bank for
people with a conscience. But it has suffered from its recent news
headlines. In the first half of this year, the bank has reported,
it lost 38,000 current-account holders.
Based on analysis by the magazine Ethical Consumer,
Move Your Money is currently rating a number of building societies
the most highly. The Ecology Building Society scores 100 per cent
for its savings account.
Move Your Money currently rates Triodos (which plans to offer a
current account in 2016) as the best bank (92 per cent); and then
Reliance (88 per cent), whose profits support the work of the
Salvation Army. These are followed, at some distance, by Metrobank
(77 per cent), Handelsbanken (74 per cent), and the Islamic Bank of
Britain (74 per cent). Of those institutions that have a strong
high-street presence, Nationwide scores highest (64 per cent).
Ms Stonestreet argues for engagement with the big banks rather
than disinvestment, however. "If everyone was asking questions of
their bank: 'How much money do you invest in local communities, or
education?', or telling them things they weren't happy with, the
bank would . . . have to do something about it."
The Archbishop of Canterbury has urged churches to support
credit unions (community-based not-for-profit co-operatives
required by law to make loans at a fair rate of interest and to
educate members in money management). The web- site
www.findyourcredit-union.co.uk can help to locate one.
ANOTHER, perhaps riskier, option that has emerged through the
internet is direct peer-to-peer lending, through websites such as
Zopa, Funding Circle, and Ratesetter. This does not necessarily
involve ethical considerations, but does cut out middlemen, and
allows more community-based finance solutions and grass-rooots
lending to small businesses.
A parallel development has been the recent emergence of
"crowdfunding". Abundance Generation, for example, invited
investors to buy debentures in renewable-energy projects, such as
community-owned wind farms, and solar panels installed on the roofs
of schools, in what it calls "democratic finance".
This is the territory of "impact investment" - designed as much
with an eye to a social return as to the financial one, like the UK
Social Bond Fund, launched last year. Although both of these
examples are regulated by the Financial Conduct Authority, however,
some advisers urge caution. "It's easy, if you like a good story,
to be manipulated into buying a wolf in sheep's clothing," Mr
From April 2015, as announced by the Chancellor in the last
Budget, it will be possible to buy peer-to-peer ISAs, which will
allow savers to lend to small businesses and social enterprises
(for example) without paying tax on any return.
In principle, these can offer a good return on pro-social
investments; but, unlike cash ISAs, they will not be protected by
the Financial Services Compensation Scheme. Mr Hassall urges
caution. "A good rule of thumb", he says, "is that if anything
sounds too good to be true, it probably is."
THERE can be a cost to conscience. "Over the past ten
years," Mr Newbigin says, "the FTSE All-Share index has
consistently outperformed the FTSE4Good; so you would not have made
as much money with FTSE4Good, and you would still have lost money
in the crash of 2008.
"There are about 4000 unit trusts and funds in the market at the
moment, of which only just over 130 are ethical or socially
responsible. Obviously, a narrower choice means you have less
opportunity to maximise your return, though quite a few ethical
funds have done very well, and one or two have done exceptionally
"That said, if you asked most people 'Would you like to know
that your money is aligned with your beliefs, and will also give
you a reasonable return in the long term?' - and I emphasise the
long term - I think a lot of people would be happy with that."
The secret is, he says, is to weigh your "capacity for loss" -
your ability to accept a reduction in the value of your investment
- against your desire to invest ethically, "so that, one way and
another, you can make decisions that enable you to sleep at
"Over the long term, in general, they do pretty much the same,"
Mr Williams says. Some investments will rise; some will fall.
"Maybe, marginally, they don't do quite as well, because there are
many fewer of them, and obviously the wider you spread your
investments the safer they're going to be; so you may lose a little
bit on diversification, but it's not like you're going to lose
three per cent a year because you're ethically minded."
ETHICAL questions can be asked elsewhere in the financial-services
industry, too. "When you buy insurance, for example, you may want
to be confident that the insurer is investing your premiums in line
with your beliefs," Mr Hassall says. Some people are concerned to
screen out only pornography, say, or gambling, but others want to
He recalls a client in her late seventies who was determined not
to put her money in armaments. "I drilled down into the companies
that Standard Life were investing in, and I found one impeccable
little business that was making filters for kidney machines. But I
discovered that the filters were also being used in nuclear
If you have an IFA, it is possible to ask them to look at your
insurance providers. The Your Ethical Money website also has a
section on insurers (www.yourethicalmoney.org/ insurance).
Ethics is such an immense can of worms that many people,
Christians included, would rather not lift the lid on it at all.
None the less, Ms Stonestreet says, it is better to take even one
step towards sustainability than none at all.
"Some people say: 'You can't be just a bit ethical,' but
whatever people can do is to be encouraged. Even when people say
they are concerned only about their financial return, I say: 'Fair
enough, but you might want to think about the fact that
environmental and social issues may have an impact on that
One example of that is the fast-growing new campaign that urges
churches, universities, and cities to divest from oil and gas
companies before the "carbon bubble" bursts. The argument is that
ever-tightening regulation of carbon-dioxide emissions will oblige
them to leave much of their reserves in the ground, which will
render them worthless as "stranded assets".
"These companies may be tremendously overvalued, in which case
the people who are invested in them are heading for trouble," Ms
Stonestreet says. "What is exciting is that there are so many more
options for investment now that allow people to express their
values in where they put their money."
"When I started to specialise in 1994, we had six ethical funds
to choose from," Mr Newbegin says. "America is ahead of us: about
25 per cent of all invested money there is now invested ethically,
whereas in the UK the figure is about seven per cent. If all the
money in the hands of British Christians and churches was invested
ethically, the potential impact is absolutely huge."
Mr Williams points out that the sector still has a low profile.
"When I talk to people, Christian or not, if I don't mention
ethical investment, 99 times out of 100 it won't come up. But if I
ask: 'Have you thought of investing ethically?', most people quite
like the idea. Often, they'll say they'd like to invest ten per
cent of their money ethically, just to get the feelgood factor.
"[But] I don't think that most Christians are yet alive to this
question. Many churches and Christian charities have never really
thought these things through. I think the controversy about the
Church of England's shareholding in Wonga has helped, because it
has shone a light on the issue. And, as Christians see the Islamic
Bank doing well in the comparison tables, I think that that, too,
will make them think."