How to be a climate activist with your money
Investing and divesting as a way to tackle climate change
We’re all trying to do our bit to tackle the climate crisis, with our time, our choices, and our money. When it comes to how we use our money, we commonly think of how our spending influences climate change, taking actions such as swapping to a renewable energy provider, choosing sustainably sourced fish, or opting for a bamboo toothbrush over plastic.
These actions all help, but what about where we keep our savings?
Divesting from fossil fuels
Fossil fuel divestment simply means ensuring that your money isn’t inadvertently funding global warming. Companies which run banks, ISAs, investment funds, pensions, stocks, and bonds can all choose to invest your money in oil and gas companies, so it’s worth checking where your money may be ending up.
Read more about divestment via Friends of the Earth
Beyond divestment: investing in alternative energy sources
Climate change is a huge global problem. To solve it, we need to stop our reliance on fossil fuels for energy We also need innovation to fundamentally change the way our energy system works and ensure that we can have an alternative zero carbon energy system which meets our needs. Companies and organisations around the world (just like us) are already working on this. But without funding and investment, this innovation simply isn’t possible.
If you have spare money to invest, you could choose to use this money to act against climate change, investing in the companies who are shaping the future zero carbon world.
This type of investment comes under an umbrella often known as ‘ethical’, ‘impact’, ‘sustainable’ or ‘socially responsible’ investing, meaning that financial investments are chosen primarily based on the positive impact a company has — in this case on the environment. Ethical and environmental investment funds are becoming increasingly popular. According to the Schroders Global Investor Study (2016), 67% of investors had increased the amount of money they put into sustainable investments in the last five years.
“I had a little money to invest, and saving the planet seemed like a good place to start.”
— Investor Member of the Low Carbon Hub in Oxfordshire
Is it possible to make a decent financial return through sustainable investing?
It’s often believed that choosing investments that are good for people and the planet will lower your financial returns. So is it possible to make a decent financial return from a sustainable investment?
The short answer: yes.
In the simplest terms, if a company is performing well, you will receive a financial return. But there has also been research which suggests that socially and environmentally conscious companies likely perform better.
A 2014 Harvard Business School study found that if you had invested $1 twenty years previously in a portfolio of public companies which were focused on growing their business alone, that $1 would have become $14.46. On the other hand, if the $1 had been invested in a portfolio of companies which focused on the most important environmental and social problems we face, whilst also growing their business, the $1 would have become $28.36.
The Low Carbon Hub: a case study
The Low Carbon Hub, for instance, are a social enterprise in Oxfordshire working to fundamentally change the way our energy system works, so that it’s good for people and for the planet.
They have a Community Energy Fund which opens to new investors regularly, with investment being put towards community energy projects in Oxfordshire — increasing the amount of renewable energy generation in the UK and reducing our reliance on fossil fuels.
The Community Energy Fund has a target interest rate of 5% (capped at 4% for the first 4 years of investment) — which is significantly better than many of our saving pots are gathering in the current financial climate.
Of course, financial reward is just one element of the ‘return’ by which ethical investors measure the successful performance of their investments. By investing in an ethical, sustainable way, your money will also generate significant social and environmental benefits — which is why it’s such a good action to take if you want to do something about our climate crisis.
