Battle firm advises consumers to be wary of ‘greenwashing’

Every April, millions of people around the world mark Earth Day to show their support for the environment. Inspired by this year’s theme of ‘Invest in Our Planet’, Path Financial is asking consumers to use their finances to do the right thing and help to tackle climate change.

Research from the Make My Money Matter campaign shows that the single biggest impact most people have on climate change is via their finances. The average UK pension has 21x more impact on an individual’s carbon footprint than other lifestyle or behavioural changes, such as reducing car journeys or going vegan.

Path Financial is also warning customers about greenwashing, with many financial firms and advisers claiming to be more ethical than they actually are.

Path Financial founder David Macdonald said: “It might not be the most obvious way of reducing your carbon footprint, but how you save and invest your money can make a huge difference to the climate.

“I would encourage investors to use World Earth Day as an opportunity to think about the impact that their money has on the wider world. By putting your money where your morals are, you really can make a meaningful difference to the world we live in.

“Be warned, many companies are guilty of ‘greenwashing’, misleading people by labelling their services and products as ‘ethical’ or ‘green’ as a marketing tactic. So, make sure that you pick a financial provider that is truly as ethical as they say they are.

“People are demanding greater accountability from businesses. As well as concern about climate change, there is growing demand to make sure that money is not invested in other areas, including Russian assets. We’ve seen enquiry volumes triple since the start of the war in Ukraine, as people look to ensure that their money is aligned with their values.”

If you are looking to invest your money in a more climate-conscious way, here are 10 tips from Path Financial:

1) What do you want to avoid? Take some time to think about your priorities and which areas you want to avoid investing your money in - it might be fossil fuels and mining and extraction, or perhaps you’re looking to steer clear of animal testing, arms or Russian companies. Knowing your personal values, which industries you want to support and which you don’t agree with, will make it easier to include or exclude certain investments.

2) Look at where your money is: Your financial provider should be able to provide a clear picture of exactly where your money is invested, and you should be able to drill into individual companies and funds to make sure they match your values. If they can’t, then you’re in the wrong place!

3) Get one-to-one advice: Your provider should be able to speak to you directly - and not just online - about your individual needs and concerns, and then review and adjust your plans accordingly. If not, then it’s time to look elsewhere!

4) Get your head around the lingo: Responsible, sustainable, ethical, green, ESG, SDG, positive impact…with such a range of ethical finance buzzwords and acronyms being used by the finance industry, it’s easy to get lost in the lingo. Path Financial’s handy guide to ethical finance jargon will help get you started.

5) Avoid the ‘greenwash’: Financial companies can appear to be more ethical than they actually are. They might have an offer which is a bit better for the planet, but the rest of the time they are busy investing other customers’ money where it is causing untold damage. It’s important to look beyond the bluster and really pin them down to find out if they are as green as they are making out to be.

6) Remember, being ethical makes good financial sense: There is often an assumption that investing in an ethical way means compromising on growth, but this is untrue. The performance of ethical funds has been shown to be comparable - and in fact, often better - to the performance of conventional funds. It makes sense to invest in progressive companies that aren’t damaging the planet, as they are more likely to succeed in the future.

7) Consider the UN’s SDG Goals: This is a collection of 17 goals from the United Nations, covering issues such as poverty, education, equality and climate action. If your financial provider is able to map your finances according to these goals, then you can be confident that you are investing in a way that will help build a more sustainable future.

8) Look into impact investments, not just ethical investments: If you want to invest in a way that will help the climate crisis, then it’s important to understand the difference between the two. Ethical investing generally excludes areas such as alcohol, tobacco, gambling and pornography, but polluting companies that cause damage to the environment are often still included. However, impact investing not only excludes companies that have a negative impact, but includes companies that make a positive impact on the environment.

9) Consider a financial B-Corp: B Corp is one of the most demanding certifications to evaluate the social and environmental impact of an organisation. If your financial provider is a certified B-Corp, you can be assured that they are working hard to make a difference to the planet.

10) Don’t put all your eggs in one basket: if you put all your money into one industry or sector and they suffer or hit a downturn, then you will lose money. ‘Diversifying’ means spreading your money across different businesses and different types of industry. This helps reduce the risk of your losing money and is very achievable with ethical or impact investments, as they can cover a broad range of sectors.

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