Becoming an Ethical Consumer: Personal Finance

Ethical consumer choices aren’t confined to in-store and online shopping. We automate a lot of bills and saving payments that may be less ethical than we realise. 

What is ethical consumption?

Have you ever watched the comedy show The Good Place starring Kristen Bell? 

Among the show’s story lines is the disturbing angle that even the “best” of us are likely going to hell (“the bad place”). That’s largely because even the simple and well-meaning act of buying tomatoes or flowers ultimately supports corrupt businesses, pesticides, slave labour, has a high carbon footprint and so on. There’s just no winning.

This plot touches on an uncomfortable truth about consumption in the modern age. Fortunately, as awareness of the immoralities behind our purchases grows, shoppers are trying to take more responsibility and become ethical consumers. 

By definition, an ethical consumer wants to divert their money towards businesses, products and services that have a less negative impact or even a positive impact on the world. 

Quick guide to making your personal finances as ethical as possible

If you want to refocus your personal finances towards more ethical companies, start with an assessment of your cash flow. 

You want to know where most of your money is going, and if the recipients can be replaced with more sustainable, responsible firms. Most of the time, the answer is yes. 

Here are four areas where you can make quick and easy upgrades to better match your spending with your ethics.

Tip: Download Money Dashboard to get a holistic view of your finances and assess potential areas where you can make changes.

1. Banks and/or building societies 

For many of us, a lot of our money goes to banks for mortgage/rent and savings. 

Unfortunately, most banks and other financial institutions fail to meet basic ethical standards. Some engage in unethical lines of work. They might lend money to oil and gas, weapons development and mining industries. Some dodge taxes. Others have a string of human rights violations, and so on. 

However a few score well, according to Ethical Consumer, a non-for profit with an ethical rating system for firms, brands and products. So if you are willing to transfer your savings and checking accounts to a more ethical bank or building societies, consider switching to ethical providers like Monzo, Triodos, Nationwide BS and Ecology. 

2. Energy suppliers

Look at your energy provider. You pay for energy each month, but is it using renewable energy sources? 

If not, it can be very easy to find renewable energy companies or ethical energy companies that service your town. Switching can be free and you may even get a lower rate. Read this for more information about switching energy suppliers. 

3. Ethical Investing 

As an investor, you do not have to choose between profit and ethics. There is growing evidence that ethical funds (those with high ESG requirements) are outperforming traditional funds. 

If you invest in stocks, funds and so forth, check their ESG ratings. But beware: a fund can be classified as “ethical” based on different criteria. For example, companies may be “ethical” for great labour practices. But those same companies could have terrible environmental impacts. So be sure to take a close look at the details of any particular company’s rating. 

4. Pension/ISA provider

If you have a pension or an investment savings account (ISA) it is absolutely worth checking which funds you are invested in. Ethical ISAs are usually an option but by default most are not invested in ethical funds. You probably have to manually select this. 

It also only takes a couple of minutes to look up your investments and to make changes. If your provider doesn’t have ethical fund options, it only takes a few clicks and forms to transfer your fund to another provider. Most of the big names offer these. 

But take a moment to look at the details of the funds and their individual holdings. Most funds invest your money across several companies – that list should be readily available to you. And as mentioned above, some companies may be ethical in ways you are not prioritising, so you may have to do some research of your own.

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