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by Uma
Your 401 K and Mutual Funds What Are the Best Investments

Britain’s millionaires are prioritising recycling as part of efforts to be more environmentally friendly, instead of changing their investments, which could have the biggest impact on the planet. 

Wealthy individuals are focused on sorting plastic from paper, and even flushing their toilets with their bathwater. However, 85% have NOT made changes to their investment portfolio, despite evidence this could be the best way to ‘green’ their lifestyles, according to new research from wealth manager and private bank Coutts. 

The bank surveyed people in the UK with assets over £1 million and found many have taken several steps to live more sustainably over the past five years:

  • 64% have recycled more household items
  • 60% have actively reduced the amount of single-use plastic in their homes
  • 40% have bought more ethically or locally produced food
  • 33% have made energy efficiency improvements to their homes
  • 19% have changed the way they managed their land
  • 19% have opted for low carbon mission modes of transport 

However, only a minority (15%) of respondents have made changes to their investments to make them more sustainable.  

Leslie Gent, Head of Responsible Investing at Coutts, said: “We know from speaking to our clients that they want to do their best for the planet, and are making huge and often time-consuming changes to their lives.

“But what our study reveals is many of Britain’s millionaires do not realise they can make a far bigger difference to the planet with their investments and pensions than they can by sorting their recycling.

“We’re on a mission to educate our clients about the opportunities they have to make a difference through their investment decisions. As a B-Corp, we believe companies that make a positive difference to the environment can also have a positive long-term financial impact on investment portfolios and are keen to ensure our clients make the most of their money as well as knowing the impact it’s having on the planet.

“We’re urging people to have a simple conversation with those who look after their money, starting with their pension provider, about the impacts their investments can and do have.” 

Tips from the experts

Leslie suggests investors ask the following questions about their portfolios to ensure they are making the biggest difference possible.

  • Is my pension fund invested with a ‘responsible’ pension provider?
  • If so, what does this mean? For example, how are they selecting companies that have a positive impact on people and the planet? Are there any activities they don’t invest in, such as thermal coal? 
  • How is the fund manager or pension provider using its influence for good? For example, are they engaging with the companies they invest in to reduce their emissions or have diverse boards? 
  • How have the green funds they offer performed against other pension funds, and what do they expect the long-term performance of these funds to be? 
  • What kind of public commitments have they made as a pension provider/fund manager? For example, have they committed to net zero investments? 
  • Are they a member of any networks/initiatives such as Climate Action 100+ or the Net Zero Asset Owners Alliance/Net Zero Asset Managers initiative? If so, how are they using these networks to improve their own ESG strategy? 
  • If I’m not happy with my current fund, what are some responsible or green funds they offer and how can they demonstrate the environmental credentials of these funds?

Research by the Make My Money Matter campaign suggests that making your pension more environmental will save 21 times more carbon than giving up flying, no longer eating meat and switching to sustainable energy – all at once. 

Film writer and director Richard Curtis, the co-founder of Make My Money Matter, said: “The UK pension pot is worth £2.7 trillion. The biggest thing people can do to make a positive change is to check their pension is ethically and sustainably invested. It’s a hugely effective way of executing change – and it’s miraculously 21 times more effective than giving up meat, giving up flying and changing energy provider.

 “I would really say to people: do it tomorrow. You can then literally sit at your desk every day of the year in the knowledge that your pension is supporting the best, most progressive, most climate-friendly businesses – rather than randomly investing in things you really don’t believe in.”

Around one in five respondents (21%) said they believed they could make a difference to the planet by switching to sustainable investment products, compared with 68% who thought recycling could make a difference. More than half (58%) thought they could make a difference by insulating their home and 47% thought they could make a difference by changing the way that they travel.

A generational divide

The Coutts study also revealed younger wealthy individuals have made more changes to their investments to make them more sustainable than the older generation.

36% of those aged 18-44 have made changes to their finances to make them more sustainable, compared with 14% of those over 44. 

18% have switched all their investments to sustainable options, compared with just 3% of over 44s.

Sustainable pensions (Coutts case study) 

One example of responsible investing is the sustainable pension scheme at purpose-driven law firm Bates Wells, the first UK law firm in the UK to become a B Corp. 

When Bates Wells formally recognised the climate emergency in 2019, they asked their people what more they could do to have a positive impact on the planet. One of the suggestions was to move their pension to a more sustainable fund given that investing your pension in a sustainable fund can be 21 times more impactful than cutting out meat and flying. 

Aviva and Bates Wells’ financial advisers helped them to add the Stewardship Fund to their staff pension offer in August 2020. Since then, they have been making information about the fund available to staff who might want to switch. They have also consulted internally to seek views on making their default pension fund one with strong ESG credentials. From 1 February 2022, all new joiners to their Group Personal Pension Plan are automatically enrolled in the Stewardship Fund. 

To date just over 10% of staff have either been enrolled in or switched to the Stewardship Fund. Over the summer Bates Wells will share more information internally to support others who want to move their pension to a fund that is better for the planet and wider society.

Angela Monaghan, Purpose and Impact Lead, Bates Wells, said: “I am really passionate about protecting the environment. I take all sorts of actions at home to reduce my carbon footprint and impact on the planet and I am always looking for more I can do to create the biggest difference. When Bates Wells offered us the option of a more sustainable pension it was an easy and obvious decision to make the switch. It was something that was a matter of paperwork but the difference it makes to my carbon footprint is amazing.”