Ecological finance options are opening up but tread carefully


Ecological financial advice may sound like a contradiction in terms, but for those who are committed to a greener world there is more than simply the Co-op’s ethical banking to consider.

The Co-op’s banking policy has been much publicised and much copied since it was instituted in 1992. But, for all its high profile, it is not the only candidate out there when it comes to offering financial services that are tailored towards an ecological as well as a politically sensitised ethical viewpoint.

Ecological

Inevitably, there is no one-size-fits-all model of financial provision that can satisfy the many different demands we might call for – whether that be in terms of saving, borrowing, investing or business funding. But the good news is that there are plenty of minority providers who do specialise in assisting those of us who take matters or ecology every bit as seriously as they do matters of economy.

For example, the Ecology Building Society specialises in the provision of mortgages based on more sensitive assessments than conventional lenders. As well as the financial security of any property, they also take account of its environmental and social impact, including its energy use, pollution, its contribution to saving resources and promoting sustainable communities.

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That agenda can make it more ‘difficult’ to get a mortgage from than a high street lender. But it also means that if a project is unconventional in some way, e.g. in terms of its use of materials or building methods (such as straw bale or rammed earth) then it may actually be more likely to lend than the mainstream providers. However, although it can be difficult to acquire a mortgage from a mainstream provider to build a new, green home, most mainstream providers are more than willing to provide a home equity loan to a homeowner interested in adding green improvements to a home. This is because green improvements have been proven to increase the value of a home.

Saving and investing

There is no apolitical savings vehicle, so any option requires an informed choice over and above its purely fiscal merit. Increasingly, help in this area is available.

The Ethical Investment Association describes itself as “an association of financial advisers from around the UK, dedicated to the promotion of green and ethical investment”. Given the complexity of different individuals’ needs and preferences, it makes sense for anyone not intricately well versed in financial matters to take advantage of professional assistance.

For those who choose to invest according to their own judgement spread betting at Tradefair – one of London’s leading providers – offers the means to invest indirectly in the performance of a particular company or stock. As a device that does not carry dealing fees or expensive commissions, it is an often over looked means of deriving a return from the success of a specifically identified organisation.

One investment area that has attracted particular interest in recent years has been the renewable energy sector. However, this is a marketplace where the motto caveat emptor – buyer beware – really does hold true. There are quite a number of projects claiming green credentials that are not necessarily all that they might claim. Care needs to be taken to establish the full history, background and investment practices of those involved. Like any popular phenomenon, the green movement has attracted its share of traders who are more interested in the money than the movement itself.

A developing trend

For the less radically minded, the major institutional players have recognised the demand for ethical investments – a movement spearheaded by the Co-op. There are reckoned to be more than 100 ‘green’ and ‘ethical’ investments funds with more than £10 billion already under management. Once again, as the ecologist.org found in 2010, the track record of some of these has not always been quite as pristine as many would like. However, the institutional security offered by such funds does offer its own benefits.

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Financial planning is complex irrespective of one’s political agenda. The bottom line for anyone committed to a wholly ethical and environmentally positive approach is that there is no substitute for thorough research and good quality impartial advice. Finally, of course, we should note that the more people there are demanding ethical and environmentally sensitive services, the more they will be provided – that democratic fundamental is – above all – the law of the market.