Can you go green without breaking the bank?
Energy, banking, pensions: here’s how your money can make or break the planet - and your wallet.
It’s not good news - again - from the energy dons.
By January 2024, we’re due to get hit with a further 5% rise in our energy costs as households continue to grapple with the seemingly never ending cost-of-living crisis (despite what the latest inflation figures suggest).
At the same time, though, comes the news amid COP28 debates, soaring global temperatures and other very scary data, that renewable energy is far cheaper than fossil fuel based electricity and gas.
Elsewhere, ESG or environmental, social and governance investing is storming the financial world. Even our high street banks are jumping on the eco bandwagon.
All of which begs a few questions - is it time, finally, to go green for the sake of our finances if nothing else?
And furthermore, is it time to acknowledge that greener really is cheaper, easier, and could even make us money?
Energy: a greener future
In the grand scheme of things, the green energy savings on offer are massive.
In fact, transitioning to a decarbonised (no fossil fuels) energy system by 2050 would probably save the world around $12 trillion compared with sticking with our current fossil fuel use, experts at The University of Oxford’s Oxford Martin School recently revealed.
That’s because producing energy through renewable sources is many times cheaper than burning through fossil fuels, and has been for several years.
Sadly, though, with the energy market crisis wiping out all but a handful of green energy tariffs along with all those standard tariffs, individual households will be hard pushed to find one that’s cheaper than average. Most are a few hundred pounds more expensive a year.
But that’s not your only challenge, because most energy suppliers don’t even produce energy from renewables themselves.
A green certificate, known as a REGO, is awarded when a generator produces a megawatt hour of energy. In a bizarre loophole, those can be sold on without the energy itself.
So legally a company can simply buy up the equivalent number of certificates to claim that its energy is 100% renewable when it really isn’t.
Good Energy, Ecotricity and 100Green (formerly Green Energy UK) are the only UK suppliers who do actually sell electricity that comes straight from renewable sources, and only 100Green can boast 100% renewable gas as well.
Also remember that the energy coming into your home is a mix of every input into the National Grid.
That means even if you’re paying for 100% renewables, the energy keeping your lights on is a massive mix.
In other words, unless you or your community are about to invest in your own renewable energy source, like a solar array (which, incidentally are fast dropping in price, will reduce your bills and could even give you an income by selling units into the National Grid,) saving money and the planet may still boil down to using less energy more efficiently. At least for now.
Banking on climate chaos
We all know about recycling, and flying less, and eating more plants, and reducing our plastic use.
But the truth is that around 50% of our personal carbon footprint comes from the financial products and services we engage with. Sort those out, then, and we could change the world.
Ethical Consumer, a publisher and campaigner, has been investigating and ranking businesses on the basis of their ethical credentials since the late 1980s.
It suggests four questions to ask before diving into a relationship with a bank:
Is it funding fossil fuels?
Does it support more ethical projects and businesses?
Is it transparent about its investments?
Is it paying its fair share of tax?
Almost unbelievably at this stage in the climate change story, all of the major high street banks will still fail that test.
The infamous Banking on Climate Chaos report, which is put together every year by a massive collective of environmental and ethics charities around the world, found that in the years since the Paris Climate Accord when the world pledged to keep global warming to less than 1.5 degrees above pre-industrial levels, the UK’s major banks have flooded the oil and gas industry with hundreds of billions of pounds.
Since 2016 Barclays has invested more than $190bn into oil and gas, HSBC has put almost $145bn of its customers’ money into fossil fuels, NatWest has invested almost $17bn and Lloyds has gone in for more than $15bn.
And while they will all tell you that they’re transitioning away from fossil fuels, they all invested yet more in 2022. Barclays bolstered the fossil fuel industry by a further $16.6bn last year, for example.
At the other end of the scale are the consistently high environmental hitters.
Top of the list is almost always Triodos, for its unwavering green position when it comes to its own investments, business transparency and other criteria.
Savings and small business focused Ecology Building Society also does well.
Pensions for life
And now for the good news. Pensions are all about saving and investing a pension pot for the future so to have a green pension you need two things.
First you need your money to be invested in environmentally responsible businesses or groups of businesses.
And when it comes to environmentally responsible investing, you could be quids in.
Morgan Stanley’s Institute for Sustainable Investing recently reported that: “[i]n the first half of 2023, sustainable funds saw a median return of 6.9%, beating traditional funds’ 3.8%. Investor demand also remained strong as sustainable funds’ assets under management (AUM) reached record levels.”
In other words, if your money was invested in sustainable funds between January and June this year, you could be sitting, crudely, on double the return on your investments compared with those invested in non-sustainable funds.
Second though, you need the organiser of your pension - your pension provider or insurer - to be eco too. And that’s harder.
Make My Money Matter, the sustainable finance campaigner, warns that £88bn of UK pensions is invested in fossil fuel companies.
“That works out at an average of £3,000 per pension holder,” it warns.
“This money is supposedly saving for our futures, but is in fact jeopardising them, because not one of these companies has ruled out expansion [in fossil fuel investing], nor do they have a 1.5 degree aligned transition plan.”
The group suggests pension holders demand change from their provider, and offers several quick and easy ways to do that - even if you don’t know who your pension provider is.
Meanwhile, if you’re keen to shift your pension away from damaging industries and businesses, Good With Money offers their top picks for sustainable pensions funds, including: Nest Ethical Fund
PensionBee Impact Plan and Fossil Fuel Free plan
Penfold Sustainable Plan
Aviva Self-select Pension - choosing from a wide range of Aviva’s ethical funds
Royal London Pensions - again choosing from their wide range of options
Pensions are complex though, and your investments are at risk, so it’s always worth talking to an independent financial adviser (IFA).
A growing number are specialists in environmentally responsible finance including EQ Investors, The Path Financial, Good Green Money, and the Ethical Investment Co-operative among others.