We should bank on a fair deal for everyone

Good Money Week aims to encourage everyone to consider ethical options for their savings. Picture: Craig Stephen

It was that great 20th century philosopher Bob Dylan who reminded us: “Money doesn’t talk – money swears!” Of course, he wasn’t the first person to warn of the dangers of money: Jesus warned his hearers, 2000 years earlier, that “you cannot serve both God and money” (Luke 16: 13). So, if money is so toxic, what is “Good money Week” (GMW) (19-25th Oct 2014) all about?

Everyday decisions, such as the food we buy and the transport we take, have an environmental and social consequence. But how we invest it – in savings, pensions and ISAs – can positively support good causes.

Good Money Week aims to encourage everyone to consider ethical options for their savings, investments and other financial products. People are encouraged to consider that ethical investment isn’t just about those who have millions of pounds to invest. We, too, can make a difference with our money.

By choosing ethical investment options, investors can help make a positive difference to society and the environment. Ethical investments can help promote transparency and encourage corporate social responsibility, help fund solutions to global problems, and may contribute to more sustainable profits in the longer term.

But is ethical investment even possible? Is there such a thing as ‘clean’ money?

Money – much like many other things in the world – can be used for good or ill. Churches and other organisations have money which needs to be looked after – money which goes towards paying pensions, or to be used for the future work of the church. Trustees of charities have a legal obligation to use these investments wisely. So how do we balance the desire to make these investments bring as high a financial return as possible with a desire to be ethical in how we invest it?

Choosing to invest ethically may sometimes mean that you’re not getting the highest possible returns in the short-term. Also, research indicates that ethical funds can do as well if not better than general “non-ethical” investments over a longer (five to ten-year) period. This may be partly because companies which seek to behave ethically are less likely to be punished by regulators for bad behaviour, or targeted by customer boycotts, so are less likely to have to pay fines.

When you invest in a fund or pension scheme, someone is investing money for you. Ethical investing means that the people who manage that money must take ethical considerations into account when they decide where to invest the money.

There are a variety of robust, ethical products for banking, ISAs, pensions, insurance and even mortgages. Considering ethical options for your finances can be as simple as thinking about your bank account.

The Church of Scotland, in common with many similar organisations, has an ethical investment policy. These policies guide it to invest in companies which get no more than a certain percentage of their profits from things they would consider unethical – such as gambling, tobacco, pornography or weapons. While some may consider any involvement in such areas unpalatable, we need to recognise that, while the companies we choose to invest in may in themselves be “clean”, they in turn may be taken over by or otherwise invested in by somebody whose business practices we disagree with.

However, it is also important to emphasise that an ethical investment strategy shouldn’t just be based on what are termed “negative screens” (ensuring that investments aren’t in companies doing things we disapprove of). It’s more satisfying to also include positive screens – ensuring that investments are in companies which are seeking to do good wherever possible. Investments such as microfinance, forestry, agriculture and social enterprises may be considered.

This of course can start to get complicated – in which case finding a good and trustworthy investment manager is helpful. Just as Fairtrade Fortnight raises awareness of Fairtrade products and highlights the positive impact of buying Fairtrade goods, GMW aims to do the same for ethical investment.

GMW seeks to encourage people to consider ethical options for their savings and investments. Realising that you can make ethical choices when using financial services could help make the world a better place. Visit the GMW website at http://goodmoneyweek.com

• Dr Murdo Macdonald is Policy Officer of the Society, Religion and Technology Project at the Church of Scotland