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Ethical personal finance

wind turbinesYou don’t have to volunteer for a conservation project in the Amazon rainforest to have a positive impact on the environment – real differences can be made without having to leave your familiar surroundings.

Buying Fairtrade food, wearing ethically produced clothing and even driving electric cars are all recognised ways of helping ease the burden on our planet, but there are a whole host of ‘greener’ ways to buy personal finance products as well.

Whether you need to take out a loan, are searching for a better mortgage deal, or want to compare longer-term investment vehicles, it is now possible to base your decision on a range of ethical criteria.

Virtually every financial product can be analysed to see how it fits in with your personal beliefs, and that its providers are doing everything in their power to act in an environmentally friendly way.

But there is a significant spectrum of the ‘shades of green’ on offer. For example, you can avoid funds that invest in controversial areas such as tobacco and nuclear power, while supporting those that back eco-friendly businesses involved in renewable energy, sustainable timber and other fast-growing activities.

You can also take out a credit card that donates to charity; buy insurance from companies that refuse to cover businesses in unethical fields; and choose a bank that has pledged to lend responsibly. All are ways to make a positive contribution.

Penny Shepherd, Chief Executive of UKSIF - the sustainable investment and finance association, said there were now ethical options to meet the needs of an increasing number of people who want to know how their money is invested.

“Investors want to make money, as well as make a difference,” she said. “We would encourage people to speak to their financial adviser to find a green and ethical investment option that is right for them.”

While the harsh reality is that you will struggle to find one financial institution that addresses all of your environmental concerns, prioritising the issues that you feel most strongly about will help you make a difference, ethically and environmentally.

How do you fancy paying interest to real people rather than bolstering the profits at faceless organisations? Well that is possible through companies such as Zopa.com which promote the idea of social lending. As well as enjoying better rates because there are no bank overheads to pay, members can rest assured that they are not borrowing money from an institution that could be using cash to promote unethical practices around the world.

Being careful how you select your mortgage provider can also help the environment. For example, if you take out a mortgage with Confused.com in partnership with London & Country, 50 trees will be planted. As a result of this initiative by L&C, more than 2.6 million trees have now been planted in selected sites across Africa over the last two years. Other providers offer reduced-rate loan to mortgage customers that agree to install energy efficient home technologies from an approved list.

Ethical investing has been a real boom area over the past 20 years. Money in these types of funds has risen from £199m in July 1989 to a staggering £6.8bn at the end of last year, according to figures compiled by EIRIS.

And there is no shortage of such funds available. The Virgin Climate Change Individual Savings Account, for example, invests in specially selected businesses that aim to drive outstanding profit growth but which have a lighter environmental footprint.

There are a number of ethical independent financial advisers and other organisations out there, but making these decisions needn’t be daunting. If you know what you need and the kind of products that tick your boxes, you can treat your ethical money decisions just like other financial matters. It may just be a matter of comparing rates and the small print on their particular shade of green before diving in.