Latest news with #ethicalinvesting
The Guardian
3 days ago
- Business
- The Guardian
A guide to greener banking: I divested my personal finances and you can too – here's how
What if your money was quietly fuelling the climate crisis – and you had no idea? If you bank with one of the big four or have retirement savings in superannuation, there's a good chance it is. In Australia, many major banks and most default super funds continue to invest in fossil fuel companies and their coal, oil and gas projects, driving global warming. That's where the global divestment movement comes in. Divestment means shifting your money out of harmful industries and into more ethical, climate-positive alternatives. It's the opposite of investment – you simply pull your capital out of companies or funds that contribute to environmental or social harm. Over the past few years, I've delved into divesting my personal finances and learned some key ways this shift can make a real difference. If you only tackle one area of divestment, make it your super – it's often your largest pool of money beyond property, and too often it's channelled into fossil fuels. The climate lobby group Market Forces estimates $150bn of Australians' retirement savings – roughly $6,200 per member account on average – could be tied up in 190 global companies driving the most climate damage. And such investment is growing, meaning our retirement savings are increasingly being used to create a more polluted world to retire into. One way to find a better option is to use the Market Forces comparison tool. It profiles more than 70 fund options, pinpointing just seven that fully exclude fossil fuels and the so-called 'Climate Wreckers Index' of the world's worst polluters. Using this type of information, I divested from a large Australian super fund which has known investments in fossil fuels and moved to a fund that excludes major polluters such as Woodside, Whitehaven Coal, Santos, Origin and AGL. Justin Medcalf, co-founder of Ethical Advisers' Co-op and Unless Financial, says to beware the 'devil in the detail'. For example, some funds use a tiered threshold screening, which may allow investment in companies earning limited amounts of their revenue from coal mining. 'A lot of investors assume that having a screening process in place means zero exposure to fossil fuels. It can be a rude surprise to discover there is still exposure,' Medcalf says. 'Ultimately, there is no perfect portfolio. For now, it's 'how do we create the best version of something that isn't perfect?'' All four of Australia's big banks – ANZ, Commonwealth Bank, NAB and Westpac – pour billions into fossil fuel projects each year, as do many other major players. In 2021, when searching for my first mortgage, I saw the chance to divest from a big four bank and switch to a more ethical option. I told my broker I wanted a home loan that was both competitive and backed by a bank that doesn't fund fossil fuels. We landed on one of the few with a cleaner track record. To find out where your bank stands, use Market Forces' Compare Banks tool. It includes a 'tell them to stop' button, so you can quickly send a message and easily demand change. That's crucial, says Medcalf. 'A lot of people move their money but don't say anything, so the bank never knows why. A key part of the divestment movement is communicating,' he says. And it works. Just last year, Commonwealth Bank broke ranks and announced it would stop financing fossil fuel companies that don't comply with Paris climate goals. 'That was quite a considerable win and a lot of that is attributed to the divestment movement,' Medcalf says. If you're investing in shares, ETFs or managed funds, beware of greenwashing. Many mainstream investment products – even those labelled 'sustainable' or 'balanced' – still include major polluters. Tools like the Responsible Investment Association of Australasia's certification and the Ethical Advisers' Co-op's Leaf rating can help you find investment products and services that meet high standards of environmental, social and ethical performance. 'We need a mindset shift,' Medcalf says. 'Rather than thinking 'what can I avoid?', think 'what can I actively invest in?' Yes, we want to avoid industries that aren't creating a positive future, but we can also get behind the industries of the future.' And divesting doesn't have to mean missing out financially – it may even boost your returns. RIAA's 2024 Benchmarking Report shows responsible investment funds have outperformed mainstream ones by 3% over 10 years, and 1.5% over five years. For long-term investors, especially those in their 30s and 40s, Medcalf says it makes sense to start factoring in environmental risk. Fossil fuel assets are increasingly seen as vulnerable, with tightening regulations and the growing risk of becoming 'stranded' and unprofitable. If you want to go a step further, consider strategically buying into a polluting company along with fellow shareholder activists who then band together to demand change from the inside. You can get started with as little as $500 using the Sustainable Investment Exchange (SIX) platform. Whether you divest, reinvest or become an activist shareholder, the point is the same: your money is powerful and you can actively choose whether it props up harmful industries or helps build a better future.
The Guardian
5 days ago
- Business
- The Guardian
Ask the experts: how do you make your money matter?
The rising cost of living undoubtedly affects the choices we can make, but research suggests Australian shoppers are still driven by their personal values. Sustainability is one of the biggest considerations. When Monash University surveyed Australian shoppers in 2024, 46% said sustainability was an important factor when they were making a retail purchase, while 30% frequently looked for sustainable products. Ethical supply chains, animal welfare, and commitments to diversity and inclusion are also common considerations for consumers, other research has found. This thinking affects decisions about products and services, but experts say to see real impact, we need to apply ethics to our financial and superannuation choices, too. Many Australians already do this. Research conducted by the Responsible Investment Association Australasia (RIAA) found that in 2024, 88% of Australians expected their investments to be responsible and ethical, up from 83% in 2022, while 65% said they would invest more if their investments made a positive impact in the the world (up from 61% in 2022). The RIAA's co-CEO, Estelle Parker, suggests we carefully consider our individual values when choosing where our money goes. Almost all of us are investing in shares and other assets via the choices our super funds make on our behalf – which don't necessarily fit with our own values. Fortunately, it's easy to switch to a fund that's more aligned. 'The first thing is to decide what they want to achieve with their investment portfolio,' Parker says. 'People can look at the websites of the funds they're considering and make sure that those funds actually do support their values.' Every super fund is legally required to disclose its investments, but the disclosure isn't always that easy to find or understand. Fortunately, there are tools that can help. Parker recommends checking out Responsible Returns, an independent source of information about super funds' portfolio holdings, and Market Forces' regular reports on how the finance industry contributes to climate change. Responsible Investment Association Australasia CEO, Estelle Parker 'We are all in a position to make a small difference through our super or other investment portfolios,' Parker says. 'People are cottoning onto that, and the growing demand is being met by really good quality financial investment options that people can take advantage of. One of the funds featured on the Responsible Returns website is Australian Ethical. Alison George, Australian Ethical's chief impact and ethics officer, spends a good part of her working week making sure that where Australian Ethical invests its customers' money – which adds up to more than $13bn in managed funds and super – reflects the organisation's values and those of its customers. 'Australians have a choice of which super fund they have and can move that money at any time,' George says. 'You are making a choice, whether you're making an active one or not.' Doing nothing, George says, is an action in itself. 'At Australian Ethical we have a theory of change for the future that guides the way we approach business and approach investment. We believe that if consumers vote with their choices and move to the funds that care about people, planet and animals, this kind of investing can grow. 'One day it could just be normal for investments to consider the impact on the environment and society as well as the impact on the bottom line, and money can become a force for good.' Australian Ethical chief impact and ethics officer, Alison George For many people, super is one of the largest investments we will make in our lifetimes – and together we can use it to make significant impact. 'The choices that we make as individuals do matter,' George says. 'Like climate change: we know it's an urgent threat. We know that as individuals, it's hard for us to tackle and engage with. But your money aggregated with others, invested for positive climate solutions for the future, is a great way that you can be doing your part to shift the dial on that issue.' Will van de Pol is the CEO at Market Forces, which holds Australian financial institutions to account on climate. He says values-driven decisions are one of the most powerful ways we can make our money matter. 'When it comes to taking on some of the world's biggest challenges – like climate change – ensuring that your power as the customer is used in a way that drives solutions to problems is incredibly important and powerful,' he says. 'The point is to make decisions about what you value most highly and see as ethical, and follow that through with your decision-making.' Market Forces CEO, Will van de Pol Australians who care about sustainability might choose to buy locally grown produce or an electric vehicle. If fair working conditions are important, they might research a product's supply chain or find alternatives to fast fashion. George says: 'We're all busy people – but the idea here is to start acting on what you know and think about making better choices, rather than doing nothing while you wait for perfect information. 'When you have time, put that effort into things that are more impactful and bigger choices for you. The car you drive, your bank, your super fund – they're all good examples of decisions that can have really broad-ranging and long-term impacts. Australian Ethical is seeing more people making values-based choices about their super, George says. 'People are recognising the importance of their superannuation money as something that they want to make sure is invested well, for themselves, for the planet and for society as well.' With $4.2tn held in super – more money than Australia's GDP – the potential for supporting change is profound. Imagine if all of that money was invested in companies trying to change the world for the better. A super fund that aligns with our values is one way we can become part of a force for good. Learn more about how Australian Ethical can invest your money to help build the future you want for yourself, your family and the world. This information is general in nature and is not intended to provide you with financial advice or take into account your personal objectives, financial situation or needs. Before acting on the information, consider its appropriateness to your circumstances and read the PDS and TMD at Issued by Australian Ethical Investment Ltd (ABN 47 003 188 930, AFSL 229949).
Globe and Mail
12-05-2025
- Business
- Globe and Mail
Starting your investment journey as a new grad? Here's how to marry your money with your values
Aishwarya Puttur opened her first bank account when she was 14, at a time when she admits she knew little about financial literacy. As she got older and became more involved in climate justice, Ms. Puttur was shocked to learn that many large banks invest in fossil fuels – an industry she saw as contributing to environmental and human harm. 'That's when I started exploring this intersection of financial institutions and social impact,' she says. Besides working out of Waterloo, Ont. as an activist and a youth columnist for CBC, Ms. Puttur – now 19 – is an adviser to Cool Climate Club, a youth-led brand that works with retailers to advance sustainability through tree planting and forest stewardship. What people might not see is how her values inform the kind of financial portfolio she's building in her personal life. 'I'm making a conscious decision to research who I'm investing with,' she says. 'Businesses can no longer be just for profit. They must be for the people and for our planet as well.' Ms. Puttur is by no means an outlier among her peers. A survey by found that 68 per cent of investors 18-29 are willing to divest from socially irresponsible companies – such as those that commit human rights violations, engage in unethical labour practices or lack environmental sustainability initiatives – in favour of ethical stocks. Values-based investing isn't new, but Generation Z might not always know the best way to begin. Tim Nash is the founder of Toronto-based Good Investing, a coaching service that aims to help a million Canadians invest more intentionally. He says Gen Z professionals should build their financial portfolios by approaching it as a sustainable investment journey – a lifelong activity where continuing planning will pay off over time. A good starting point would be setting up what he calls an 'ethical emergency fund' to avoid having to make hasty decisions based on short-term financial needs. Save up three to six months' worth of expenses and put it in an account or fund that is liquid, he suggests, meaning its value won't drop if you need to convert it into cash. This could be done through a credit union, a solution like Wealthsimple Cash or an institution like EQ Bank, he says. In your long-term bucket, you can then look for exchange traded funds (ETFs) made up of companies that are focused on environmental, social and governance (ESG) criteria. All-in-one ETFs are made up of a highly diversified set of stocks and bonds, however, and Mr. Nash says conversations with your investment adviser should clarify where exactly your money is going. 'You want to earn the same rate of return as you would otherwise, but get rid of the nasty stuff,' he says. 'And everyone's going to have a different idea of what that means.' Cindy Marques, a certified financial planner and director at Open Access Ltd., says there can be misperceptions that values-based investing means sacrificing wealth. 'It's not a matter of choosing one over the other, where you say, 'I'm going to be socially responsible with my investments,' or 'I'm going to get competitive returns,'' she says. 'In many instances, companies that are structured to ESG-compliant metrics, or socially responsible metrics, tend to be more resilient and prepared for other risks that come up. And they're able to sustain market downturns or volatility in a similar manner as any other competitive company or fund.' Ms. Marques suggests reflecting on whether you're simply trying to avoid investing in certain areas – such as the alcohol, tobacco and gambling sectors – or want to invest in companies pro-actively doing good in the world. This could include organizations that are putting people from under-represented communities on their board, for example, or which have committed to sustainability goals. 'You have to make sure you're satisfying what's actually important to you as an investor, rather than just applying a negative filter,' she says. Values also tend to change over time, Ms. Marques points out. Approaches to running a business that once seemed acceptable may become taboo or even considered unethical. That means values-based investing can require careful research into the claims a company makes, the actions it takes to back them up and how they are measuring their progress. 'This is a lot of work for the average investor, and I would not necessarily task them to do that themselves,' she says. Instead, look for advisers that make their philosophy for picking and choosing their investments clear, and let them do that due diligence on your behalf. Values-based investing may appeal to Gen Z professionals in part because they have been witnesses to continuing cracks in the economic system, Mr. Nash says, leading to consequences ranging from climate change and food insecurity to affordable housing and more. 'When you understand those systemic issues, all of a sudden you start to say, 'Okay, I want to be part of something different.''
