A guide to carbon divestment for your personal finances

With climate change posing a clear and present danger to the health of the planet, we need to take all possible action to avert climate catastrophe.

Our campaign focuses on switching your current accounts, savings accounts, cash ISAs and investment funds away from companies still funding fossil fuel projects. To make maximum impact, switching into accounts which actively support new renewable energy projects is best.

The bad news is that many high street banks and institutions are involved. Our article on banks and the environmental crisis lists some of the top offenders such as Barclays, HSBC, Santander, NatWest and Lloyds are on the list.

However, the good news is that ditching those that support the fossil fuel industry and switching to positive alternatives has never been easier.

Our guides to ethical finance products have recommended alternatives who are seeking to move away from investing in fossil fuels.

Below we list some of the most innovative institutions actively working in the transition away from a fossil-fuel economy.

Divest Your Current Account

In addition to Triodos Bank and building societies, another more eco-friendly option for your day to day banking is the Cooperative Bank.

The Co-operative Bank states its support for renewable energy organisations alongside a commitment not to provide banking services to the fossil fuel industry. 

It has, however, recently sold many of its renewable-energy assets to raise cash, and does not control the hedgefund investments of some of its owners. 

No building societies offering current accounts are making a point of supporting renewable energy, but neither do they invest in fossil fuels.

View our guide to ethical bank accounts to find out more >

Divesting your savings accounts and cash ISAs

For those looking to switch a savings account or cash ISA there are three banks that actively invest in renewables:

Triodos Bank

Triodos has ethical investment policies that support low-carbon initiatives, and publicly discloses their investments – a great practice for a sector that is resistant to openness and accountability. 

Triodos offers financial services to a range of projects including organic food and farming businesses, renewable energy enterprises, recycling companies and nature conservation projects. 

Charity Bank

Charity Bank also has ethical investment policies, and publicly disclose their investments in an annual ‘loan portfolio report’ which includes a couple of renewable energy projects.

Charity Bank only lent to charities, social enterprises and organisations with a charitable purpose, and stated that it conducted a social impact assessment for each loan.

Ecology Building Society

Ecology Building Society focuses its lending on projects that offer the greatest gains in terms of carbon reductions and environmental impact, with its ethical lending policy prioritising: sustainable housing practices, sustainable lifestyles, sustainable economic activity, and other ecologically positive projects and ventures.

Ecology offer a range of savings accounts.

Other building societies and mutuals 

For more widely available savings accounts and cash ISAs we recommend national and local building societies. They generally operate as mutuals (a type of co-operative, rather than making profit for shareholders) and invest in housing stock rather than fossil fuels.

To find out how these companies rate along with many of the main high street banks, view our ethical shopping guides:

View our guide to ethical savings accounts >

View our guide to ethical cash ISAs >

Divesting your investment funds

If you are in the fortunate position of having additional funds to invest, the good news is that there are several options available which don't invest in fossil fuels, and which proactively invest in more sustainable industries.

Being proactive with your investments is sometimes called impact investing. Impact investing involves putting your money into funds, projects or companies that aim to have positive social and environmental outcomes while at the same time providing a return on your investment.

The aim is to create value for you as an investor and the wider world at the same time.

Our guide to fossil fuel free investment funds has several high scoring companies, including WHEB, Triodos and Castlefield.

Many individuals choose to invest in ethical funds via an independent financial advisor (IFA). See our guide to choosing an ethical IFA.

Read our guide to impact investing to find out more.

Divest your direct investments

Direct ethical investments allow individuals to create change by playing a part in supporting, often smaller, environmental or social projects. Investments normally take the form of loans or shares of some type, and there is always a risk that you may lose the whole of your investment if the project fails.

It is advisable that you seek financial advice before making a large investment. There are now ethical 'innovative finance' ISA's available for you to be able to invest in some of these projects tax free.

Direct investments can be a great option for ethical investors who are looking for transparent investments. This is because you usually invest directly in a project and can see exactly where your money is going rather than into a mutual fund or a unit trust. They can also be great for ordinary savers because the minimum sums you can ‘invest’ are usually low - one fund for example, starts at £5 and another at £50.

Some of the top scoring funds in our ethical guide to innovative finance ISAs are ETHEX, Energise Africa, Abundance, and Triodos.

ETHEX collates and lists most of the best positive investment opportunities that come up in the UK. Ethex also runs the Lendahand brand that invests in Energise Africa which focuses on universal access to affordable clean electricity across Africa. Abundance Investment specialises in UK based renewable energy projects and was the first crowd-funding platform to be regulated by the FCA. Individuals are able to deposit money online and then invest in specific projects according to their preferences. Triodos also run a crowd funding platform allowing you to invest in a range of environmentally sustainable projects.

Find out more about these and other innovative finance ISAs via our guide.

Divesting Pensions

There are four basic (sometimes overlapping) options for pensions, and there is usually an ethical pathway in each.

Some options are more ethically sound than others and none are without their own risks in what is a very complicated sector. 

Perhaps more than with any other type of investment, you should consult a financial adviser before taking out any type of pension or moving your pension around different schemes.

1. Many people are already in an occupational pension scheme. These tend to be very traditional in their investment strategies and heavily invested in fossil fuels. However, most financial advisers are agreed that, if you are lucky enough to be in one of these, staying put makes financial sense.

Shareaction is among a number of groups that can help you lobby your fund manager for carbon divestment.

2. Most employees in the UK who are not already in a workplace pension scheme will now be auto-enrolled into a scheme, thanks to the UK's government scheme.

3. You could also have a ‘private fund’ or personal pension (SIPP) as well as either or both of the above, but if you are not an experienced investor it is always better to speak to a financial advisor first before you do this. A SIPP can be linked to an existing ethical investment fund or even to a carbon-divested fund.

4. You could also try 'off-piste' saving – bundling a number of different options, such as property, direct investments and ISAs (as mentioned above) – but this comes with more risk. Financial experts are divided on the issue, but many say that property investments alongside ISAs will give you greater options in retirement. If ethically managed, this could be an attractive ethical option too but you should always work with an ethical financial advisor to get the best arrangement for you. 

Our ethical guide to pensions discusses in detail the various ethical and environmental issues of different pension providers.