‘Mo Money Mo Planet’

When it comes to climate change, we need to put our money where our mouth is.

Three ways anyone can be a money activist

Last month public concern for the environment reached an ‘historically high-level,’ with a third of UK adults*?claiming that climate change was their second biggest concern for the country after COVID.

These concerns are not unfounded: My short time on this planet alone has seen the global population nearly double from 4 billion to 8 billion. The carbon dioxide in the atmosphere has increased by a quarter from 355 parts per million to 420 parts per million, our planet has warmed by over 1 degree Celsius and our flora and fauna has decreased by over a third. We are changing our planet at an alarming rate and it is essential that we act?now?to reverse the damage we are doing, not just for our planet but for the people who live on it.

It’s easy to look at the?world and feel helpless?–?like we have no voice nor power to make a real change?–?but in reality, even as individuals we can have a big impact in changing the prosperity of the planet (along with our own financial prosperity!) by becoming?money activists?and engaging in how and where we invest in our future.

The word ‘activism’ may conjure up images of marching in the streets –?and it might seem a bit of a leap to move from financial planning to global warming?–?but the truth is, the finance industry has a pivotal role to play in the fight against climate change. So, financial activism, i.e., how your money can both be invested in industries you

believe in, or drive positive change in those still operating in a way that won’t leave the planet in a way we’d hope?to find in 50 years, should not be overlooked.

The word ‘investment’ might feel intimidating, like you don’t have the spending power to be a force for good for?the planet; but in actual fact anyone can be a?money activist, and here are three ways which you’ve probably never considered.

1. Did you know your pension can be a force for good?

Pension contributions normally come from three sources: the government (your State Pension), your?employer and yourself. Regardless as to how you’re currently topping up your pension pot – and even if you’re close to retirement?– it’s likely you haven’t engaged with where that money is going, because you probably don’t think of it as your money right now.

Just because you can’t ‘spend’ your pension in the traditional sense today, that doesn’t mean it’s not?being used on your behalf at this very moment. However, until you engage with where that money is going, those decisions are being made by other people?–?teams at fund managers–?who decide which companies or industries need that investment?–?usually by buying shares and bonds in those companies in order to grow your money.

The money in UK pensions is worth trillions of pounds, and your workplace pension will have billions per year to invest - a huge amount of money, which is used by companies and industries in orde r to keep innovating, expanding, hiring and prospering.

Your money will likely be funding entire industries such as renewable energy, technology and businesses you’ve never heard of, as well those you have, like Disney, Google and Unilever. They all need?this money to grow sustainably in the future.

The actions these companies and industries take now will have a huge impact on environmental issues, far more than we can ourselves: Getting one person to boycott plastic is good, getting one global company to re-think how they manufacture and reduce waste is a whole different ball game.

So, you see, how you invest your money has the potential to be a catalyst for change; meaning in order to be a money activist, the onus is on all of us to invest responsibly?–?and your pension is a great way for anyone to?get involved. This doesn’t mean that you compromise the financial performance of your investment either, it means that you don’t give up on financial performance with the power to do good – after all there’s is no point retiring with plenty of money if we have trashed the planet.

In shifting your mindset to one that thinks responsible investing is fundamental to achieving long-term, sustainable returns, you can in effect, vote with your pension to nudge co mpanies and countries to raise their game and become good ancestors. If a business is producing renewable energy then that company is already having a positive impact in the world; whereas if a business is operating in a way that is detrimental to the planet, our money can be used to influence those businesses to change to a more sustainable way of working. So, rather than boycotting brands still working in ways that neither reflect our values nor support the greater good of the planet, we can put our money where our mouths are and use this investment to drive these companies to operate as better ancestors.

The really brilliant thing of course is that it requires little effort on each of our parts to do this. You’re already investing money in your pensions, in your children’s pensions and in ISAs and JISAs. All you need to do is look at the funds that your money is being invested in, and if it’s not being invested in the way that you would like it to be, switch it to another fund. It’s simple and easy to do.

2. How do I vote with my pension?

We know, money talks - and now you know your pension has a loud voice. Coming together to use that voice cooperatively to shift all your collective workplace pension investments - billions of pounds a year - away from?companies doing business in the old way, the way that won’t leave us with a planet we want?to live in in 50?years’ time, is simpler than you think.

You could write an email to the CEO of one of the businesses you think should be doing more for the planet. But this email to your HR team or pension provider will be quicker, and more impactful:

Hi there 

I want to invest my workplace pension in a responsible way to ensure when I retire and get my pension it’s in?a world worth living in. I want to understand how you/my pension provider is engaging with the businesses you invest in. Both on ESG issues to ensure a more sustainable future, and are they invested on the right side of climate change.

Thanks        

Your pension contribution helps the world turn. It is a powerful voice - a vote -?that you’re probably not using, instead letting other people use it to speak for you.

Changing how the world turns is a big task, but in this space when things move, they move quickly. Today there are more electric charge points in the UK than petrol stations, five years ago that was not the case, ten years before it was almost inconceivable.

Imagine if every person with a pension today sent this one email. This could be a game -changer.

3. Can I go one step further?

Yes! And once again it’s easier than you think. In fact, just giving up one coffee a day can make a?latte?difference to both your pension and the planet!

As well as engaging in where your pension is invested, it’s also essential that you know how much you?have?in your pension pot, and how much you need in order to retire. If you’re not sure, you’re not alone with one?1 in 3 Brits not knowing how big a pension pot they'll need, and 1 in 5 not knowing how much they have**.

For a comfortable retirement, your personal contributions need to be between 15-20% of your salary, which sounds like a lot, but is achievable by starting early and breaking it down into simple steps. A great way to?help you hit this goal is by swapping what you’d spend on a latte every morning and saving and investing that money in your pension.

Instead of buying a coffee on the go every week day, contributing ￡100/month to your pension (roughly your daily coffee habit including National Insurance), equates to an annual personal pension contribution of ￡1,320?–?￡13,200 over a decade - growing to ￡20,000 if invested with the long-term in mind. If you are a high-rate tax payer the benefit is even greater.

This good habit, kept up for an average career length of 40 years and through the magic of compound interest and tax relief, that ￡20,000 could grow to over ￡300,000. Which, not only makes for a comfortable retirement, but if invested responsibly and sustainably is actually 27 times more impactful for the environment than if you fly less, eat less red meat or cycle to work?–?although we should be making an effort to do those things as well.

*?https://www.ipsos.com/ipsos-mori/en-uk/public-concern-about-climate-change-and-pollution-doubles-near-record-level

***Survey by Unbiased and Opinium of 2,000 non-retired UK adults in June-July 2020