Ethical Investing for your pension
I choose to consume products and services that are environmentally friendly. Or are made by companies with environmental ethics and values. I buy my clothes from shops that have a good ethical, recycling policy. My food comes from a supermarket with strong UK supplier ethics and a great attitude to looking after their staff.
I drive a hybrid car, pumping out much less harmful toxins into the atmosphere and I buy renewable energy to power my house. I make considered choices about every-day purchases to ensure my money is going to companies who are thinking about the future.
But what about my investments?
I have a chunk of money invested in my pension, and I add to it regularly. My money is currently invested in a tracker fund via PensionBee where I consolidated all my previous employment pensions and can now add to whenever I choose.
My tracker fund is a very general fund with a high risk level. The fees are low fees at 0.5% and this drops to 0.25% when my balance goes over £100k. I chose it for simplicity and low cost three years ago when I consolidated my pensions with PensionBee.
The fund invests your money in global shares, bonds and cash. Investments follow the worlds markets as they move. It is managed by State Street Global Advisors.
Looking at the fund information sheet (or factsheet) I can see some information about how the funds are invested, but not much. 80% of the fund is invested in equity, so shares. The rest in bonds and gilts. And I can see that 40% of the fund is UK based.
I have no choice over where the money is invested, and it could be invested into companies that have terrible environmental policies but provide good financial returns. I no longer sit comfortably with this thought.
But I am now thinking that I want to invest my money in a more considered way. I am keen to switch my money and want to do ethical investing for my pension. I have a couple of options with PensionBee and easily switch my money into an alternative fund via the online portal.
The Future World Fund
PensionBee have the Future World Fund, a fund that invests your money into companies that pledge to move to an environmentally friendly economy. A fund managed by Legal & General.
It is a riskier fund than the tracker fund with 100% of its money invested into equity/shares. It is a far more global fund with just 7% invested into the UK and nearly 50% invested in the USA. There is a higher fee of 0.95% representative of the higher risk. The higher risk represents potential greater returns but also greater potential losses.
The fund manager chooses to invest in companies which are less carbon intensive or earn green revenues. The manager will have the discretion to reduce investment in certain companies which do not, in the manager’s view, demonstrate adequate strategies and governance standards to transition to a low carbon economy.
The top three companies invested in from this fund include Apple, Microsoft and Royal Dutch Shell. The world leaders in technology being Apple and Microsoft. The oil company is a challenging choice for an ethical fund. I understand that people might be averse to investing in oil, but it is one of the biggest companies in the world and the more we invest in companies like this, the more they can do to change huge environmental issues.
We can all do our bit to be environmentally conscious as individual human beings, but fundamentally we need the big players, the large companies and governments to take action. And personally, I feel if my money (and the huge pots of money in these investment funds from everyone) is invested in these companies, then they have more to make a difference with.
Shariah Plan
An alternative take on ethical investing is to invest in a PensionBee Shariah plan. Your money is invested only into Shariah-compliant companies. Investments are approved by an Independent Shariah committee. A plan suitable for anyone wanting to invest based on faith and those who want to invest responsibly.
Shariah funds have many requirements including the exclusion of investments which derive their income from the sale of alcohol, pork products, pornography, gambling and military weapons. There are certain types of income that are prohibited, such as interest, which may be donated to charity.
This fund at PensionBee is a HSBC fund managed by State Street Global Advisors. And due to the more complex managed nature of the product the fees are higher at 0.95% up to £100k.
Ethical Investing
It feels like there are lots of options out there for a more ethical investing approach. And I predict its only going to grow and grow as more people change their entire behaviour. It makes so much more sense to invest with an environmental bias if you really want to make a big difference. Are you going to put your money where your mouth is and invest in ethical funds?
Please be aware that any form of investment can go up and down. You may want to consider advice from a qualified IFA. Just make sure they come recommended by a trusted friend and check their investment levels. Some will only work with clients with an investment level of at least £150k. This post was written in collaboration with PensionBee.
