Need to know
Have you ever wondered what your money is doing while it sits in your bank account? I used to think my savings were just waiting patiently for me but, the truth is, money is always at work – sometimes funding industries that harm the planet or exploit people. The good news? You don’t need to be wealthy or experienced to make ethical financial decisions. Whether you’re managing a savings account, contributing to a pension or just curious about investing, you can align your money with your values.
You’ll notice that I’m going to begin favouring the term ‘sustainable’ over ‘ethical’ – the former allows us to side-step many of the heated debates about what counts as ethical and focus instead on tangible outcomes, such as impacts on the environment or labour practices. For this reason, the word ‘sustainable’ also tends to be used more often in the financial industry.
The advice I’m about to share covers both saving and investing. What’s the difference? Saving means storing your money safely, like in a bank account, where it earns a small amount of interest and is available when you need it. Crucially, the bank uses your savings to make loans and investments. By contrast, investing involves putting your money directly into assets like company shares. It comes with more risk, but it also offers the potential for greater rewards and is often geared towards long-term goals, such as retirement or college funds.
Thanks to a plethora of emerging financial apps and platforms, sustainable saving and investing is now easier and more accessible than ever. Even small amounts – just a few dollars, pounds or euros – can make a big difference over time. And it’s not just about making decisions to ease your conscience or make you feel good about yourself. To take the example of the environment, research shows that changing where you save and invest can have a far bigger beneficial impact on the environment than lifestyle changes such as eating less meat or driving less.
No matter where you’re starting from, let’s see how your money can grow while making the world a better place.
The ripple effect of your financial decisions
When you think about your money, it’s understandable that you might be focused on the numbers – for instance, how much you need for spending versus how much you can afford to save or to invest. But the truth is, where and how you place your money can shape the future. Banks and investments fund companies, projects and ideas – and not all of them will align with the values you care about. Every dollar you save and invest becomes part of a larger story, influencing business practices, communities and the planet.
Most traditional financial institutions focus only on profit, without looking at the bigger picture. For example, banks invested more than $705 billion in fossil fuels in 2024, with $347 billion going to fossil fuel expansion alone. Many popular mutual funds (a kind of group investment scheme) and pension funds also support industries that pollute, exploit workers or worsen inequality, often without investors realising it. But once you know where your money is going, you can take steps to change that.
Sustainable saving and investing means putting your money into banks and companies that focus on both financial growth and social or environmental progress. Instead of asking only: ‘How much interest will I get?’ or ‘How much will my investment grow?’, you’re also asking: ‘What kind of change can my money create?’ You’re making a choice that goes beyond profit. You’re aligning your money with your values and supporting companies that aim to make a positive impact on the world.
You might be concerned, understandably, that taking sustainable financial decisions could mean you will have to sacrifice profits – if you don’t have much to start with, this could be especially off-putting. Be assured this isn’t the case. Of course any investment can go down as well as up, but in 2023, sustainable funds outperformed traditional ones, delivering 12.6 per cent returns on average – nearly 50 per cent higher than the 8.6 per cent return from regular funds. This shows that you can earn well while also supporting causes you care about.
It’s also important to consider that the benefits to making sustainable financial decisions aren’t just monetary. There’s also a deep sense of purpose that comes from knowing your money is driving positive change. With sustainable saving and investing, you can grow your wealth while contributing to a brighter future. It’s a win-win!
Assess sustainability
In the financial world, a common way to assess sustainable investments is by using the ESG criteria:
- environmental (E): how a company impacts the planet (eg, carbon emissions, renewable energy use);
- social (S): how it treats people (eg, fair wages, diversity, community engagement); and
- governance (G): how well it is managed (eg, leadership transparency, anti-corruption efforts).
These criteria were first proposed formally by the UN in their report Who Cares Wins (2004). They provide a framework to empower investors to make smarter, more values-driven decisions. While the system isn’t perfect – different rating agencies might assign slightly different ESG scores – these criteria offer a great starting point. Many financial websites and platforms provide these scores for individual companies (including banks) and investment funds. You can think of them as a guide to help you align your saving and investments with the causes you care about. As you become more familiar with making sustainable choices, you can dive deeper into the nuances and choose the banks, funds or companies that resonate most with your values.
