We all want to put money away for the future, but how can we save or invest in ways that reflect the issues we care about?
Whether you’re building up your savings in cash or investing them in stocks and shares, it’s important that you know where your money is going.
What does ‘ethical’ mean and how does it impact my life?
Ethics are the moral principles that guide everything we do. They help us to work out if we feel something is right or wrong, and are often personal to us. Something that you have no problems with might be seen as unethical by someone else, like smoking tobacco or eating meat.
Ethics play a big role in our everyday lives, especially when it comes to spending money.
“Ethical consumption” means choosing to spend money with companies that have moral values that we approve of. For example, companies that treat their employees fairly, pay their taxes, support their communities or take steps towards reducing their negative impact on the environment.
Here are some examples of how you can spend your money ethically.
Buy fair trade goods
For some time now, you’ve been able to choose a “fair trade” version of some of the foods you buy, such as chocolate, coffee, tea and fruit. If a product is labeled as fair trade then you know it was produced by a company that pays farms and food producers and their employees fairly and provides good working conditions.
The farms have to keep up these standards to keep the fair trade label.
So, when you buy fair trade products, you know your money is going to a company that treats workers fairly.
Buy free range goods
Some animal products such as eggs and milk are marked as “free range”. This means that the animals those products came from have the option to roam freely outdoors for at least a few hours every day, instead of being permanently indoors in sometimes overcrowded enclosures.
When you buy free range products, you’re voting for better treatment of farm animals.
Buy sustainably made clothing
The fashion industry is one of the most polluting. It is also responsible for many breaches of human rights, it is widely reported that many clothes available on the high street are produced by poorly paid workers in poor working conditions.
When clothing is labeled as “sustainable”, some effort has been made for it to be produced and sold in ways that have less of a negative impact on the environment or where workers are paid fairly and have good working conditions.
When you buy sustainable clothing, you’re giving your money to a company that is working towards doing right by its workers and the environment.
Your money can have a big impact
By supporting businesses that operate ethically, not only are you helping them succeed, but you’re also actively choosing not to support a business that goes against your values.
If you choose to buy clothing from a company that pays its workers fairly, you’re also choosing not to give that money to a company that doesn’t.
Where you spend your money matters. Paying workers less and sourcing items in unethical ways tends to be cheaper for businesses than doing the right thing. This means bigger profit margins for them.
But if enough people look into how the things they buy are made and choose to buy from ethical businesses instead, businesses that rely on unethical practices may start losing money and consider changing how they operate to attract business again.
What is ethical saving?
When you save money in a cash savings account, your bank lends that money to other customers or invests it in businesses who come to the bank asking for a loan. You don’t usually know what businesses your bank invests your money in and it’s not something you normally get to choose.
This can be a problem if you want to keep your money out of businesses that go against your moral code - your ethics.
Ethical savings accounts
If you’d like to save in cash but you want to make sure your money isn’t supporting businesses that go against your values, you can open an ethical savings account.
Ethical savings accounts tend to commit to investing in companies that are working towards reducing how much damage they do to the environment. They are likely to have a list of criteria or a scoring system to work out which companies to invest in, but different providers will do this differently.
The right kind of ethical savings account for you will depend on which industries or businesses you want to avoid, so it’s best to look into which companies your bank invests in, if you can.
What is ethical investing?
Ethical investing is, simply put, the act of investing your money in assets and businesses that reflect your personal values, and actively avoiding those that don't.
When you invest your savings in stocks and shares, you either buy those stocks and shares yourself or put your money in a product that invests it for you, like our Stocks and Shares ISA.
If you choose to put your money into a product, it will be invested in a fund, where money from many people is pooled together and used to buy assets.
To increase profits, these funds sometimes invest in companies and assets that you might feel aren't ethical in how they produce money, as they could show better profits and will look more attractive to investors. Fossil fuel companies are a good example of this, as they perform well financially, but their business model is considered to be damaging to the planet.
Some people invest their money themselves by buying individual stocks and assets to make sure their money isn’t going to companies they don’t want to support. But this can be risky, especially if you don’t have a lot of experience in the stock market.
Ethical investing with stocks and shares ISAs
Ethical investment funds, unlike regular investment funds, tend to prioritise investing in more sustainable, environmentally friendly businesses.
With our Stocks and Shares ISA and Lifetime ISA, you can choose to invest your money in one of two funds.
Our Global Equity fund invests up to 100% of your money in, what we call, climate-focused options. That means where your money is invested is chosen based partly on how companies rank on our climate-focused scoring system.
Companies’ scores are checked regularly so if they improve, they may be rewarded by more funds like ours buying shares in them. But if their climate score goes down, we’re less likely to buy their shares.
So, by investing in Global Equity, you’re giving companies reason to become, or stay, environmentally aware.
Our other fund, Global Mixed, invests up to 35% of your money in company shares via the Global Equity fund, with at least 65% being invested in lower risk, fixed-interest assets.
That’s the process we follow at OneFamily. Different investment fund providers will choose where to put your money using different criteria, so it’s worth checking with providers before you decide to invest your money in their fund.
Stocks and Shares ISA
With one, simple annual management charge of 1.1%, our Stocks and Shares ISA could be a good option if you're looking to invest over the long-term.
Lifetime ISA
If you want to save for your first home or for life after 60, our Lifetime ISA could help as you'll gain a 25% boost from the government on top of your savings, as well as any potential stocks and shares returns.
Our Stocks and Shares ISA and Lifetime ISA invest in stocks and shares. This means they have good long-term growth potential, but the value of your investments could go down as well as up so you could end up with less money than you've put in.
