The Investments That Fuel a Green and Clean Future; PERSONAL FINANCE: Ethical Focus

Article excerpt

Byline: ANGHARAD LYNN

ETHICAL financial products are shaking off their sandal-wearing image to become one of the fastest growing areas of personal finance. They abound in all areas - from unit trusts and investment trusts, through to pensions, savings and mortgages - and they are set to become an integral part of the market in the years to come.

In this special three-page report, Financial Mail assesses whether ethical products are good for your financial health.

MOST people are clamouring for a cut in the price of fuel - but not everyone. Many feel that oil companies contribute to pollution and that fuel use should be limited to prevent environmental damage.

Increasing numbers of investors are putting their money where their mouths are and choosing ethical funds or products as a key part of their personal affairs.

One of this growing band is John Arnison, 37, a freelance photographer from Leeds. He is adamant that cars should not be used more than necessary and uses his bike wherever possible. He also recycles bottles and newspapers as part of an environmentally-friendly lifestyle. And recently John took it a step further by investing in a cash Isa with Ecology building society.

John, married to Lucy, 31, says: 'I try to live an environmentally friendly life and supporting a building society such as Ecology is part of this.'

John, a Quaker, is happy with the interest rate of 5.05 per cent he earns from his account.

He says: 'I am not a City whizkid type. I am not looking for the highest possible returns. I obviously don't want to lose money, but it is more important to me that the company is ethical than it is to get the highest rates.' A growing number of people share John's views and they are now more able to run all aspects of their finances in an ethical way.

Though ethical investments represent just two per cent of the investment fund market, it is one of the fastest growing areas.

Traditionally, ethical funds do not invest in nuclear energy, oil, pharmaceuticals, arms or tobacco companies. Increasingly, ethical funds are choosing the companies they invest in for both negative and positive reasons.

For example, they will search for the company in a particular sector that is the most socially responsible or that is attempting to improve its environmental record.

Dan Kemp of specialist ethical adviser Holden Meehan in London says that these 'light green' funds are attracting more mainstream investors, and they are encouraging companies to clean up their acts and become more environmentally friendly. The key areas of personal finance where ethical products are making their mark are:

ETHICAL SAVINGS ACCOUNTS

Money saved with Ecology building society is used to finance ethical mortgages. It offers a cash Isa that pays 5.05 per cent interest, rising to 6.05 per cent if no withdrawals are made during the year.

It also has a 60-day notice account offering four per cent. Savers must be members of green organisations. Other ethical savings accounts are available through Coop and Triodos banks. Bristol-based Triodos bank uses money saved with it to finance socially and environmentally-friendly projects such as free trade coffee, wind turbine manufacturers and social housing.

It offers a cash Isa with a rate of 6.09 per cent.

ETHICAL MORTGAGES

Ecology building society uses the money lodged with it to finance mortgages primarily to people who want to build their own environmentally friendly homes or who want to renovate houses.

An ethical mortgage from Ecology building society has a standard variable interest rate of 7.39 per cent, with 0.5 per cent discount in the first year.

Norwich & Peterborough building society has a 'green' mortgage that offers discounts of between one per cent and 1.25 per cent on its standard variable rate to those who buy or build energy-efficient homes. …