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Climate change and related issues have become key topics in politics, business and more. And research from Aviva found that 7 in 10 UK residents believe “urgent action” is required. If you’ve been making climate-conscious decisions, one area you may have overlooked is your finances.

Interestingly, the survey found that over-65s are leading the way in climate-conscious behaviours despite younger generations feeling more compelled to act on climate change.

Indeed, over-65s are twice as likely to shop locally or take steps to save waste water when compared to young adults. They’re also more likely to recycle as much as possible, turn off lights in unoccupied rooms, and choose energy-efficient appliances.

The good news is that people across all age groups plan to reduce their impact on the environment by making small lifestyle changes.

While you might make changes to your daily life, have you considered how your finances could affect the climate? Read on to discover three steps you could take to reduce your impact.

3 financial questions that could help you reduce your environmental impact

You might have already changed your spending habits if you want to be more eco-conscious. Perhaps you purchase groceries from local farms or choose products without plastic packaging where possible.

While positive steps, how you save or invest your money could have an even larger effect.

Here are three questions you might want to consider if you wish to reduce your environmental impact.

1. Where is your money saved?

What do you look at when you’re searching for a savings account? The interest rate might be a key factor, or you may want to ensure the money is accessible to cover potential emergencies. But have you considered how your savings are used by the bank?

While you might think of your savings as sitting in your account until you make a withdrawal, the bank uses the collective deposits of customers to invest. So, while you might not actively be investing your savings, they could still be financing sectors or businesses that don’t align with your views.

For example, your bank might invest in fossil fuels or businesses that are involved in deforestation.

There are specialist banks and building societies that are aimed at ethical savers. And, as demand grows, high street and challenger banks are increasingly changing their practices and being more transparent about how they use customers’ money.

One of the challenges for customers is that there aren’t standard definitions for terms like “green” or “sustainable” in the sector, which can make it difficult to compare the options.

If ethical saving is important to you, reviewing a provider’s corporate sustainability report could be a useful place to start.

While you might be keen to open a green savings account, you also need to ensure it suits your needs. 

2. How is your money invested?

When you invest your money, you may need to consider lots of factors when weighing up opportunities. You might want to assess how long you’ll be invested, your risk profile, or the other assets you hold.

You could also include the environmental impact of your investments. Some funds have a sustainable focus, or you could select stocks and shares in businesses that reflect your values. Investing with your ethical priorities in mind may help you reduce your carbon footprint.

Remember, investment returns cannot be guaranteed and all investments carry some risk. While you may want to make your investment portfolio greener, don’t forget to consider whether an investment is appropriate for you and your goals.

3. How is your pension invested?

While reviewing your investment portfolio, don’t forget your pension. Despite often being among the largest assets people hold, pensions are easy to forget about as they’re usually inaccessible until you reach retirement age.

Pensions are typically invested with the aim of delivering long-term growth over your working life. So, reviewing how your pension is invested could have a significant impact on your contribution to climate change or other environmental issues.

According to a report from the Make My Money Matter campaign, the UK needs to invest $40 – $60 trillion (£32 – £48 trillion) in climate solutions by 2035. Currently, UK pensions are on track to deliver 10 – 15% of this, but with just 4% of pension assets estimated to be invested in climate solutions, there is potential for it to grow significantly.

Reviewing how your pension is invested could mean your retirement savings support climate change action. And the effect could be larger than you think.

Make My Money Matter calculates that making your pension green is 21 times more powerful at cutting your carbon footprint than giving up flying, becoming vegetarian, and switching energy suppliers.

It’s important to consider how changing where your pension is invested could affect your long-term goals and risk profile.  

Contact us to talk about your finances and how to align them with your views

If you’d like your finances to reflect your views on the environment, climate change, or other key issues, please contact us. We could help you create a plan that not only aligns with your values but supports personal goals too.

Please get in touch to arrange a meeting to discuss how we could add value to your financial plan.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.