Ethical savings soar as customers wash their hands of 'dirty money'

THE amount of cash being invested in "ethical" savings has soared as investors look to avoid companies linked with pollution and human rights abuses, new research has revealed.

The amount of money held in ethical savings products increased at its fastest rate for a decade during 2009.

Consumers paid 19.2 billion into ethical savings accounts and investment products during the year, a 34 per cent jump on the 14.3bn saved in them during the previous 12 months, according to Co-operative Financial Services (CFS).

The group said the rise was more than double the 15 per cent increase in savings and investments seen across the entire market during the same period.

The biggest in-flow of money was into ethical investments, with this rising by 40 per cent to 9.5bn during the year, while ethical banking deposits rose by 31 per cent to 9bn - well up on the 4 per cent growth recorded in total banking deposits during the year.

There was also a 19 per cent rise in the amount of money held with credit unions or invested in ethical stocks to 657 million.

Tim Franklin, chief operating officer at CFS, said: "The growth that we're witnessing is evidence that in the wake of the financial crisis more consumers are considering the ethical as well as financial impacts of their money. While ethical finance has grown steadily over the decade there has clearly been a recent acceleration.

"This is something that we've experienced at The Co-operative Bank, with current account openings up 38 per cent last year."

The kinds of people demanding ethical investments have also changed, experts claim, with hard-headed investors among those getting involved.

"Investors come from all walks of life," says Julian Parrott, the chairman of the Ethical Investment Association, "and the perception of the 'hippie' green and ethical investor is just a stereotype. Just like Fairtrade coffee, ethical investment is entering the mainstream and is an important part of the growing ethical consumer movement.

The significant growth in investment opportunities means that there are sufficient investments both for those clients who just want to dip their toe in the water and for those who want to create a fully ethical portfolio."

The amount of money held in ethical financial products has soared nearly four-fold during the past decade, rising from 5.1bn in 1999 to 19.2bn at the end of last year.

The biggest increase was in the amount people held in ethical banking products, with this jumping by 423 per cent to 9bn.

Meanwhile, separate research from Uksif, the sustainable investment and finance association, found that 54 per cent of people with investments said they would like their money to be used to make a difference, as well as to earn them a return.

But despite this, some 43 per cent of people said they were not aware that they could put their money into green or ethical products ranging from Isas to mortgages and pensions.

Only 8 per cent of people currently hold an ethical investment, but 37 per cent said they would consider taking one out in the future.

Uksif is co-ordinating National Ethical Investment Week this week.