“Messy and disappointing”: a journey into positive investment

Friends of the Earth have been running an innovation challenge focused on how to make it simpler for people to align their savings with their values and put their money to work tackling climate change. As part of the challenge, I was interviewed by Mary Stevens, the Programme Manager, about my experience of positive investment. I wanted to invest to be part of the solution, not the problem. But despite a relatively high level of awareness of the issues and opportunities the journey was far from simple…

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Tell me a bit about your personal situation. What were your aims?

I was looking to put away £5000 as a medium-term investment. I was happy to take a bit more of a financial risk, and was also looking for a bigger return than if I just put it in an ISA. But above all I was looking to put it in a fund that would build the world we want. I know a lot of ethical funds just do negative screening — no arms or tobacco for example — and I wanted something different. I wanted my money to be actively doing good.

Where did you start your research?

I started where a lot of people do, on moneysavingexpert.com. This was great for general investment advice but I only found two paragraphs on sustainable or ethical investment and nothing that could help me. I also talked to family and friends about my options — but again, no one was able to offer specific advice on positive investment.

So where did you go to try to find out about ethical funds?

One of the first things I found was the Ethical Consumer index. But the detail of the index is only available to subscribers. And I couldn’t tell exactly what they’d based the ratings on, and whether their priorities were aligned with mine.

I also looked at the opportunities for investment and savings accounts with the providers I was already familiar with: Triodos, Charity Bank, Nationwide, Ecology Building Society. The options were OK — but there was very little in the higher risk, positive investment space. Nothing felt exciting or pioneering. The fees also felt high and I was concerned about the way Triodos uses RBS as its clearing bank. It felt like their hands were tied. [ed. Triodos is explicit about this issue on its website, explaining how limited the options are for them].

I did ask Nationwide whether they could provide any financial advice, as I have a current account with them, but the next available appointment was in six weeks, and even then the advisor did not have ‘specialist’ expertise.

What did you do once you’d ruled out investments with mainstream savings providers?

I started to investigate individual funds. For example, I knew about Generation Investment Management, because of the Al Gore connection [ed. GIM LLP was founded by Al Gore in 2004, who is still the chair of the advisory board]. But I couldn’t figure out how to actually put any of my money into it. I also looked at WHEB Asset Management as I’d come across them in a professional context previously. I had the same issue here — and wherever I looked. I also came across Impax Asset Management, via a tip-off from a relative (they hadn’t appeared in web searches). I liked their Environmental Leaders Fund, but again, I couldn’t figure out how to get into it.

At this stage I started to try to figure out whether I could work backwards. Could I find the platforms that could help me place an investment? I went back to Moneysavingexpert.com. There were about five different platforms they recommended — Cavendish online, Aviva, AK Bell, a couple of others. They were all charging different amounts and the website really came into its own here. In the end I did work out how to place the investment with Impax via one of these.

I also looked at the newer app-based platforms (Nutmeg, Wealthify, Evestor) but all of these are just passive funds (i.e. index funds, that track the overall performance of e.g. the FTSE 250) and they don’t have any model to do the due diligence on the underlying funds.

What surprised you the most on this journey?

Just how difficult it was. And how complicated it was to put money in a fund, even if you found one you wanted. I can’t believe there isn’t a good specialist website that has a good ranking system and simple guidance for how to do it. Ethical Consumer didn’t feel expert enough, it didn’t seem appropriate to apply the same methodology to investments as to a toaster or a pair of jeans.

There are some rankings, and some specialist platforms out there such as Ethex, or the Good Egg mark. Did you come across any of these?

No. I did come across 3dinvesting, but I found the website tricky to use.

What would have helped you?

I didn’t want a financial advisor conversation. That would just have been another load of fees. But it would have been great if there was an organisation with some credibility putting something out there — some signposting. A detailed moneysavingexpert.com section on sustainable investment, for example. Doing for positive investment what it does for insurance, or savings or pensions.

What advice would you give someone wanting to do the same?

It’s hard to know. Obviously I can’t give financial advice. Starting at the end point didn’t really help; even if it did provide a solution in the end I don’t know if it was the best one. Some peer networking might have helped; blogs or friends who’d done the same thing. But overall the whole process felt messy and disappointing.

Was there anything else you learned from this experience?

It’s important to know the difference between the sustainable funds the big providers offer, and real positive investment. In most cases “sustainable” just means a few exclusions of guns, alcohol, tobacco — often not even fossil fuels! I’m also concerned about the growing dominance of passive funds, especially in the newer app-based services; it removes any leverage that individual investors may have. [ed. a point this FT article also makes].

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Michael Hilton, author of this blog!

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