Ethical consumption is booming, yet we’re still not being Good With our Money

Written by Rebecca Jones on 18th Dec 2018

The latest report from Ethical Consumer has revealed a veritable explosion in ethical consumption in the UK, with clothing, food and green energy all booming. Meanwhile, however, the ethical banking sector is shrinking, while a separate report suggests consumers are still not connecting the dots between their money and sustainability.

According to Ethical Consumer’s report, the ethical clothing market grew by 20 per cent in 2017, with the second-hand market expanding 23 per cent due to shoppers buying pre-loved items due to ethical and sustainable concerns.

Veganism is up 153 per cent since 2016

Meanwhile ethical food and drink sales grew by 17 per cent, driven by sales of vegetarian specialty items. This ties in with a recent YouGov survey in which 11 per cent of Britons reported they were vegetarian and 3 per cent vegan – a staggering increase of 52 per cent and 153 per cent respectively since 2016.

By far the most impressive growth, however, was seen in the UK energy market, with Ethical Consumer reporting this expanded by an incredible 56 per cent in 2017. This comes as consumers begin to leave Big Six providers in droves for cleaner, greener suppliers like Bulb – last week named as the UK’s fastest growing company.

All of these figures stand in stark contrast to wider UK retail sales, which last year fell for the first time since 2013 as Britons are hit by a weaker pound, rising inflation and a Brexit-shaped hole in consumer confidence.

 

Good Money worries

Where the ethical market is lagging, however, is money. The report shows that the ethical banking sector shrunk by 2.6 per cent last year, from around £21 billion in 2016 to just over £20 billion in 2017 as the sector continues to reel from the collapse in deposits at the Co-Op.

This is since the 2015 corporate governance scandal that saw former bank director Paul Flowers ousted for using company phones to call sex chat lines, while also being filmed buying (a lot of) drugs.

Good growth was seen in ethical share options, though, sales of which grew 10 per cent thanks to increased direct investment in renewable energy projects, while ethical investment also grew by 6.6 per cent and ethical building society deposits were up 3.9 per cent.

Money can be a hugely powerful form of democracy in creating the world we want to live in

While this helped to push total ethical money growth to 1.2 per cent in 2017, this was still less than half the rate of inflation (2.7 per cent). Moreover, the decline in banking is a big concern for the ethical money market, as this is where the majority of Britons are financially active. Indeed, according to HMRC statistics, only 13 per cent of Britons have a stock and shares ISA, while the Competition and Markets Authority reports that almost every UK adult has a bank account.

Commenting on the report’s findings, Bevis Watts, managing director at Triodos Bank – the UK’s biggest ethical challenger bank – says:

“There has been encouraging growth in many key consumer areas. However, we need to spread the message that saving and investment choices are also important. Money can be a hugely powerful form of democracy in creating the society we want to live in.

“Switching your bank account should be no more difficult than switching energy supplier. Indeed, moving to ethical banking is one of the few one-off actions that can be taken by a ‘conscious consumer’, and it sends a clear message to the banking industry that customers demand transparency and accountability.”

 

Information barriers

The report echoes findings by global investment manager Schroders. The firm’s latest global investor survey shows that 73 per cent of savers report recycling and reducing their household waste, while 56 per cent report avoiding companies with controversial track records. Despite this, though, just over 40 per cent say they invest sustainably.

Effectively this means that many consumers could be investing in companies they would never buy from, either actively through shares and funds in ISAs and investment accounts or – more likely – unwittingly through company pension schemes.

Barriers remain for sustainable investment to reach its full potential

Schroders suggests that one of the chief reasons for the low level of sustainable investment is a lack of information, with 57 per cent of global investors reporting this as the chief barrier for them when considering investing in line with their principles.

Schroders says: “Climate change, shifting demographics and the technology revolution are reshaping our planet, our values and how we invest. Against this backdrop, sustainability has been rising on the agenda of investors.

“But barriers remain for sustainable investment to reach its full potential. Performance is not a major concern, but a lack of information is currently limiting people’s allocation to sustainable investments.

 

Engage or finance fossil fuels

Schroders observes that one of the chief concerns for many investors is that they do not fully understand the impact a company might be having on the environment or society, or how it is held to account for transgressions.

Engaging is the only way to ensure our money is going where we want it to go

This is a common concern for many investors, and one of the driving factors behind the rising popularity of impact investing. However; either piling into a mainstream investment full of fossil fuel companies, big banks and global pharmaceutical companies seems an odd solution, as does simply not engaging with current pensions or investments, or not investing at all.

Indeed – as has long been the case in the energy market – engagement really is the only way to ensure our money is going where we want it to go. And as it seems we have finally gotten over our reticence there, hopefully ethical and sustainable finance is next.

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