In 2008, a small group of activists tried to take on the big high street banks and encourage savers to move their money away from those who had used taxpayer bailouts to pay themselves bonuses, towards banks which had a stronger sense of social or environmental purpose beyond profit.
They were driven by a sense that finance was no longer the servant of the economy and society, but very much its master, putting profit before people and planet.
Moving your money would get their attention, it was argued, because a bank with less money, is less of a bank. But with governments and central banks more than happy to provide trillions in reserves or capital to “keep the ATMs working”, it rather blunted the individual effect of people moving their money.
A decade on, Richard Curtis, the filmmaker, is encouraging ordinary people to “make your money matter”, this time by switching their pensions to companies which offer “sustainable” investments and reduce the indirect financing of companies that produce fossil fuels for example.
The question I am often asked, by customers and prospective investors, is whether moving your money is the most effective thing they can do? Would it be better instead to focus on direct action either via protests, the ballot box or, of course, investing directly into companies and projects via mechanisms such as crowdfunding?
It is a harder question to answer than you would first think.
For example, Make My Money Matter bases its claim for the effectiveness of moving your pension on research carried out in partnership with the pension firm Aviva, comparing the Global Greenhouse Gas (GHG) emissions.
This compared a pound invested in a global index of shares and a pound invested in an equity-focused sustainable pension fund and found that the difference in GHG emissions was 0.64kg per £1 invested.
Added up this produced a total reduction in the impact of an average pension pot of more than 19 tonnes of emissions annually.
The idea that the very act of saving for our retirement is financing the production of emissions which will be detrimental to our wellbeing in that retirement has caused record amounts of money to move into funds which claim to invest based on “environmental, social and governance” (ESG) objectives.
The challenge to this thinking is of course that the “act” of selling a share or bond to someone else does not in itself reduce the amount of GHG emissions that share is responsible for. It merely transfers that share to another investor, possibly at a discount to the original price.
This has the effect of making investing in companies that generate more emissions cheaper (and more profitable) for the more Faustian investors out there. While there has been enormous growth in holdings of ESG funds, the total funds under management ($2.7trn as of December 2021) are still tiny compared to the global estimated funds under management of more than $115trn.
The idea of reducing your carbon footprint (a concept which itself was invented by a leading fossil fuel company) may be something of a green herring when it comes to the power your money has to change the world for the better. Owning a share in a company gives you a stake in that company and it is to you as a shareholder that the management of the company are accountable for its performance – whether that is profit or its wider environmental and social impact.
This has led to a steep rise in the number of shareholders putting forward climate-related resolutions to the boards of the companies they own, which as I wrote previously in this column, caused big investors such as BlackRock to backtrack on their commitment to back such resolutions with their financial clout as the world’s biggest investor.
As Bernie Sanders pointed out in a recent tweet, the three biggest investors in the US are the biggest shareholder in 96 per cent of the S&P 500 – an index of the biggest 500 companies in the US. What these investors have to say matters to companies beyond simply their share price.
Perhaps it is this political impasse that leads many to take action into their own hands, just as Occupy Wall Street took the argument to the bankers’ doorsteps, and my own company placed an inconvenient bright pink sea container in the heart of Canary Wharf financial district emblazoned with the word “Consequences”.
The Extinction Rebellion movement’s high-profile protests have sought to expose in particular the ways in which fossil fuel companies seek to burnish their brands with positive social and cultural investment, while continuing to burn the planet.
These protests and the resulting net zero legislation around the world is proof that individual protest can move the minds of politicians for whom previously the inconvenient truth was just that, inconvenient.
As investors we can also make a difference.
Putting a portion of our investment pot into enlightened companies directly through mechanisms such as P2P lending or crowdfunding – a concept which the UK invented and that has been taken up around the world – plays an important role in funding businesses which don’t fit the “business as usual” models that drive the decision making of big banks and investors.
Greening your pension is a good start, but as these heatwaves are demonstrating, we have more than capital at risk when it comes to investing our money.
Bruce Davis, cofounder and joint managing director of Abundance Investment