If you have a bank account or mortgage, invest in stocks and shares, or pay into a pension scheme, it is worth finding out if your money is being invested in a way that isn’t harming the planet. On this page we provide advice on choosing an ethical financial provider, switching financial providers if necessary, and voicing your concerns about ethical investment.

Find out if your financial provider is an ‘ethical investor’

It isn’t easy to define exactly what an ethical financial provider does – it’s more what they don’t do that makes them an ethical alternative. According to The Ethical Consumer there are two things to establish – how does the company invest its money, and does it pay its fair share of tax? A truly ethical financial provider is unlikely to invest in the fossil fuel sector or projects that damage the natural environment, nor is it likely to set up in a tax haven.

Banks and building societies
 
You can find out whether your bank or building society is an ethical investor by searching for their Responsible Investment and Ethical Investment strategies on their websites. These sound the same but are actually different. An Ethical Investment strategy might, for example, involve divestment from the fossil fuel sector. In contrast, a Responsible Investment approach might advocate engaging with the sector and 'calling for action'. Debates exist as to the best strategy. Climate scientists such as Mike Hulme (University of East Anglia) have argued that a focus on fossil fuel divestment is a misguided tactic, since other investors will simply pick up the slack from modest investment withdrawals.

For an independent view, The Ethical Consumer analyses the performance of UK banks, ranking them according to factors including environmental, political involvement, record on workers and human rights, and their product sustainability. Tiny Eco Home Life offers a similar service and provides a useful overview of ethical banking (the website also has a page concerning ethical stocks and shares ISAs). Finally, Moral Fibres provides a particularly good summary of ethical savings and credit card accounts.

Mortgages
 
There is a range of websites offering advice on mortgages. The Ethical Consumer includes an excellent summary of what to look out for in an ethical mortgage. Good With Money and The Good Shopping Guide include overviews of the best responsible and ethical mortgage providers. The Ecology Building Society regularly tops these lists, specialising in properties outside the mainstream, including self-build mortgages for non-standard but energy efficient construction and energy efficient renovations.

Pensions
 
The first thing you need to find out about your pension scheme is whether it is an ‘unfunded’ scheme or supported by an investment fund. If a scheme is unfunded, it means that there is no money set aside for your future pension and therefore there are literally no investments – ethical or otherwise – involved. Instead, your contributions and those of your employer go into the government’s coffers, and you have very little say in what is done with your money, other than by exercising your democratic right to vote.

Unfunded pension schemes are pretty much unique to the public sector, and include the schemes for civil servants, NHS workers and teachers. However, things are not quite as clear cut – even within the public sector, the Local Government Pension Scheme is underpinned by a large investment fund.

Private sector pensions are invariably backed by investment funds. Members of these schemes may have questions about how the money in their fund is invested. The government and the Pensions Regulator are gradually stepping up the rules to make sure that such schemes report on their investments, especially with regard to their climate change impact. Most larger schemes will have websites and produce annual reports with information about investments. There are also official documents such as ‘Chair’s Statements’ and ‘Statements of Investment Principles’ that give members more to go on.

If you know the name of your pension investment fund, you can find out information about it via websites such as Trustnet (which includes details of top investment holdings). For any pension scheme backed by an investment fund, you can also find out if the scheme subscribes to the UN Principles for Responsible Investment.
 
If you are considering setting up a private pension – or want to switch your current pension to a more ethical one – the Good With Money website has a handy page listing the best ethical pensions funds. Various blogs are also available discussing responsible investments and pensions, including one by the Grantham Institute.

Switch bank or financial service provider

If you are unhappy with the environmental stance of your bank, mortgage provider or pension fund, one option is to switch to a more ethical provider. Switching bank is often seen as a complex process. However, government regulation designed to reduce monopoly in the UK banking sector has forced banks to make switching accounts quick and easy, taking just seven working days.

The simplest approach is to use the online Current Account Switching Service (CASS). With over 50 banks and building societies signed up to the service, CASS covers 99% of UK current accounts. You can check if your bank or building society is signed up here.

Alternatively, when you open a new bank account, you will usually be asked if you want to switch. If you do, by providing the details of your old account, the switching service will move your money, direct debits and standing orders across, and close your previous account. It will also transfer any payments meant to go into your old account, for example your salary. For at least three years, any money paid into the old account or wrongly paid out of that account will be moved across into the new one.

Switching mortgage is more complex but not impossible. Compare the Market, Money Saving Expert and Money Supermarket have very good guides to re-mortgaging. For advice on switching pension provider, it is best to contact your current provider directly.

Voice your concerns about ethical investment

If you do switch your bank account or mortgage for ethical reasons, don’t forget to tell your original financial provider why you’ve switched. The Ethical Consumer website has a handy template to help you do this.
 
If you are unable to switch bank or mortgage provider, voice your concerns about responsible and ethical investment by writing to the appropriate member of the executive management. For pensions, write to the Head of Corporate Affairs or Trustees.
 
If you have a pension underpinned by an investment fund, check the pension’s website to see if you can opt out of funds investing in sectors that do not align with your environmental values.