How to use your money

ONLINE EXCLUSIVE

Money, money, money. The subject of Swedish pop songs and the root of all evil, but currency is pretty hard to live without. Whether you have millions in the bank or a few pennies saved in a jar for a rainy day, have you ever considered if there’s a better way to use the cash you’ve earnt? The term 'ethical investment' can conjure all kinds of images. Are we talking about just avoiding tobacco and arms, or maybe investing in organic food and windfarms. How about microfinance or other social investments? We asked financial experts for their top tip on using your money ethically.

Please note: all our experts are speaking in a personal capacity to raise awareness about the options on offer. We can’t offer investment advice. Before acting on the ideas raised here, please do seek independent financial advice. Please remember that the value of investments may go down as well as up and is not guaranteed.

Loan to locals

Credit Unions are community banks. Just like a normal bank they offer savings and loans, and your money is protected by the Financial Services Compensation Scheme up to £75,000, so it's completely safe. But unlike a normal bank, Credit Unions only lend to their members, who have to live within a particular area (e.g. Leeds, or east London). So they are a way of investing in your local community. Those loans will often be given at low rates of interest to people who would otherwise end up going to a payday lender and getting into debt. So I use my local credit union because I want my money to bless my neighbours and provide an alternative to the Wongas of this world.

David Barclay, faith in public life officer at The Centre for Theology & Community

Bank with Christians

Believing that everything belongs to God (1 Chronicles 29:11) extends to all our money, including our savings. An ethical bank brings together your savings and ISAs, and is able to use these to bring about positive outcomes. Banks like ours, Alliance member Kingdom Bank, are distinctive in the way that we care for each other, look after our customers and use the money to make a difference through:

• Mortgages for church growth and development
• Social return mortgages delivering clear benefit for vulnerable people
• Buy to let mortgages for ministers, church workers and missionaries to invest in property for later in life.

Chris Sheldon, chief executive of Alliance member Kingdom Bank

Ask questions

Find out where your ISA and pension are invested – in regular or ethical funds? Do they contain shares in companies involved in cluster munitions, guns used in mass-shootings, cigarettes and online betting? Do the funds support the transition to a low carbon economy? There are plenty of funds available that incorporate ethical restrictions, promote corporate responsibility, and invest sustainably. While options may be fewer for those in company pension schemes, you can ask whether the fund follows the UN Principles for Responsible Investment and for ethical funds to be provided in defined contribution schemes. Financial advisors can help.

Edward Mason, head of responsible investment for the Church Commissioners at the Church of England

Do your research

We are called to steward all of our resources well, but it’s often hard to know where our money is invested. As an easy first step, take a look at ethical banks like Triodos, Ecology Building Society and Kingdom Bank. They offer a range of standard cash accounts, low risk investments and ISAs and are transparent about how they use your money.

A few other tips: if you use a financial advisor, ask them how you could reflect your kingdom values in your investments. Write to the trustees of your pension scheme and ask them what non-financial criteria they consider when choosing funds. And for those who want to dig further, I highly recommend visiting the website 3dinvesting.com - an excellent free resource identifying some of the most ethical, sustainable and impactful funds available.

Martin Rich, sales director at Social Finance Ltd

Manage your portfolio

The actual word 'ethical' is quite broad, and even where there are common collective ethics through our faith, there are also individual ethics held by each unique person. Quite often common ground is found in the negative screen, where certain companies are excluded from portfolios for their activities, such as tobacco, pornography, human rights and arms. More divisive is the exclusion of large polluters, fossil fuels, animal testing, alcohol, GM food and even high street banks. In other sectors, such as retail or insurance, for example, a best of class approach can be used to favour companies with higher ethical standards.

A positive screen then adds investments that are ethically desirable. Quite often this will include renewable energy, microfinance, water, recycling, education, healthcare, sustainable food and many other themes.

Investments can often be made via bonds, REITS, equities or funds, enabling risks to be more balanced. An ethical portfolio therefore is our favoured way of making ethical investments and goes a long way to meeting these needs.

Wayne Bishop, director of ethical fund management at King and Shaxson

Give it away

When it comes to investments, giving has got to be one of the most ethical options for our money. High social, environmental and spiritual impact and, while immediate financial returns might be harder to achieve, the eternal returns are immeasurable.

Naturally, a Stewardship Giving Account is a great place to start getting serous with your giving, whether it’s tithes and offerings to your church, support for Christian ministries and workers or any other UK charities.

Getting your giving organised in one place makes it easy to track and challenge ourselves regularly about what, where and how much we’re giving – as well as helping make the fiddly stuff, like Gift Aid and tax returns super easy.

Many of our account holders review their giving regularly and push themselves to increase the amount they give each year. Some even set a cap on their living expenses and give the rest away!

Daniel Singleton, head of business development at Alliance member Stewardship