How your money as students could be contributing to climate change.
What is it?
When someone talks about Ethical Financing, a lot of people are automatically put off because it seems like a complicated topic and they are not wrong, it defiantly can be. When I first started researching into this I was so confused and felt like I wasn’t understanding any of it. There was so much jargon that I didn’t understand and honestly, thought I just wasn’t clever enough to be able to. I feel this is sometimes done on purpose. If someone can’t understand something, how can they question it. This did infuriate me a little (I like to be able to understand things) and so I continued my research, watching lectures, attending training until it made sense – somewhat.
The first time I had ever heard of ethical financing was when I attended an online COP26, and we spoke about ethical investing and how many banks and institutions invest in fossil fuel organisations. I will come back to this later.
Marianne Hayes explains ethical financing to be, “the practice of choosing financial companies and products that provide positive financial returns while also prioritizing the greater good.” In very basic terms, when we store our money with a bank, the money doesn’t just sit there, it is used by that bank. So, if you keep your money in a bank, it doesn’t sit there and wait for you, that bank may use the money to invest in things, harmful or good such as they may invest in solar panels or in oil companies. If we store our money with a bank that is ethically harmful, our money is supporting these harmful practices, such as fossil fuel companies, arms and weapons companies and modern slavery. For example, Banks like Barclays, Lloyds, NatWest, Santander and Citigroup have been named in relation to funding cluster munitions, nuclear weapons. However, if we keep our money in an ethical bank, we are supporting better and more humane things. This is the same for if you invest your money.
It also isn’t just about where we keep our money, it is about how we spend out money. Have a think; what everyday actions have you done this week that the financial system (e.g. pensions, investment funds) could have funded? If I think about this question, I think of every small thing I have spent money on this week. I went to the Liverpool Comic Con earlier this week. This meant I paid for petrol, paid my ticket to enter. I also bought a McDonald’s for food there. If I look at the two main things I spent money on (petrol at Morrisons and McDonald’s) I need to think, where am I spending my money and what are they organisations doing with my money after I hand it over.
Invest for change.
Since I learned about this, I have actively been trying to work with the University to make sure our institution is doing all it can to be ethically responsible. To try and understand what I was going to be lobbying for, I went on a training course at the start of the year run by SOS (Students for Sustainability) called, ‘Invest for Change’ and it focused on ethical investing and financing. I found this training day really helped me understand this rather complicated subject, so I wanted to share what I learnt with you.
It was interesting to look at Universities around the UK and what they do regarding investing. Most Universities will have policies about what they can and can’t invest in. It was nice to see that more universities have an investment policy, but it was equal in terms of who mentions fossil fuels in their policy and who doesn’t, most didn’t have any student representatives on committees making these decisions, and most don’t list the investment policy publicly. This is concerning because not only do students not have a say, meaning companies are not challenged by investors who own a slice of their assets (students) and questionable projects could be funded.
So how do universities invest? Universities have endowments (a donation of money or property to a non-profit organisation, which is to be used for a specific purpose) which is normally the primary pot of money that universities invest. Universities invest in different asset classes like shares (companies), bonds (loans) or property (buildings) which generate financial returns, contributing to university income. Universities should have a policy guiding the way they invest and following this policy will be the responsibility of the Finance or Investment Committee.
Universities also generate income from around six different things and endowments and investment incomes are actually the lowest. The middle is other funding, research grants and contracts, and funding body grants. Where universities get most of their money is through tuition fees and education contracts with nearly £80 million being generated through this. What does this mean for students? This means that when universities are investing their money, they are using the money generated from student loans. However, it is (somewhat) good to know that most of the money universities spend their money on is operating expenses (building costs) and staff salaries.
There were a couple of things the training suggested we do to ethical manage our finances. The first was to move our money as individuals. Actively research the bank you are banking with and see what policies they have for investing. If it is unethical, move your money to a better one. Secondly, it is for our institutions to move their money and for us to lobby them to do this. Universities, on average, invest about £15 billion. Compared to pensions funds (£2.6 trillion) this is very low, however, this is still an enormous amount of money which may be funding unethical organisations or practices which is why it is so important the universities have good and active policies about where they invest and store their money.
What next?
Since the training I have investigated what Aberystwyth University does on their investing and what policies they have. They are currently updating their investments policy so it will be interesting to see what is included in this. Aberystwyth University is very vocal about not directly investing in fossil fuels but that they do so through third parties but what are these third parties? The university itself uses Barclays as its primary bank – one of the biggest banks in the UK, and with over $200bio overall, also the largest investor in fossil fuels in Europe. Through its investments, Barclays is literally facilitating the expansion of the fossil fuel industry, putting more of an economic profit in a way of energy generation that we know is destroying the planet; we know is rapidly wrecking biodiversity and with it, our ability to reside on this planet. It’s not just Barclays unfortunately – most of the UK’s major banks (like HSBC, Lloyds, NatWest, Santander, Chase) are involved in similar activities, which is why it’s a good next step for big institutions and individuals to look into the smaller, less high street bank (some examples -- if partially still high street -- are Triodos, Co-op, Nationwide, Cumberland). So, while the uni itself might not invest directly in fossil fuels – they are supporting fossil fuels through large sums of money still, and Barclays may well be what they mean by third parties. Student groups have begun lobbying and trying to pass policies about this to get Aberystwyth University to stop banking with Barclays with what seems to be a lot of success and understanding from key university people. Let’s hope for better and more ethical banking in the future.