Are you ready to take your first step toward making your savings more sustainable? Let’s explore how you can align your investments with your values while still meeting your financial goals.

Understanding the Basics: Your “Money Pots”

When it comes to managing your savings, a good way to think about it is by creating different “money pots.” Each pot is dedicated to a specific financial goal—whether it’s a short-term target like your next vacation, a medium-term project like supporting a community wind farm, or a long-term objective like planning for your retirement.

For each goal, you’ll need to choose financial products that help you achieve it. But before selecting these products, it’s crucial to consider two key elements: your financial preferences and your sustainability motivations. Let’s dive deeper into what this means.

Meet Ana: An Example of Balancing Financial Goals and Values

To make these concepts clearer, let’s look at Ana’s journey toward sustainable investing. Ana, like many of us, has mixed motivations when it comes to her investments. She wants her money to:

1. Align with her values (Value Alignment).
2. Have a positive impact on the real economy (Impact Investing).
3. Consider environmental, social, and governance risks (ESG Integration).

Each of these motivations influences how she approaches her money pots, depending on her goals and the time horizon for each investment.

Example 1: Choosing a Sustainable Bank Account

Ana needs some short-term cash for her upcoming vacation, so she’s focusing on her bank account. Like most people, Ana chose her bank based on fees and convenience. But now she’s considering her sustainability motivations and discovers something troubling.

Her current bank uses her deposits to provide loans to companies involved in activities that conflict with her values—companies generating revenues from weapons production, animal rights violations, and coal-based energy production. However, Ana also learns that other banks in her country offer savings accounts that only provide loans to sustainable projects, such as renewable energy startups and community-focused businesses.

This is a pivotal moment for Ana. While switching to a sustainable bank would mean slightly higher costs, she decides that it’s worth it to align her savings with her values. Even if it means compromising a little on her financial preferences, she’s satisfied knowing her money is contributing to positive projects that wouldn’t exist otherwise.

Example 2: Investing for Retirement

Ana also wants to allocate a portion of her savings for her retirement, which is 30 years away. For this long-term investment, she’s looking for a diversified fund that operates across different sectors and regions. She wants an average market return and a medium risk profile, but it’s still important to her that the fund respects her sustainability motivations.

Ana finds two funds that catch her interest:

1. Fund 1: This fund only invests in companies that align with her values and actively uses its influence as a shareholder to make them even more sustainable. However, it has a higher risk and lower return compared to similar options.
2. Fund 2: This fund excludes companies involved in weapons production and animal welfare violations but doesn’t entirely exclude those linked to coal. Upon closer inspection, Ana learns that this fund selectively invests in energy companies with credible plans for reducing their coal production and uses its influence as a shareholder to encourage a transition to more sustainable practices.

Ana faces a dilemma: should she go for the first fund that’s perfectly aligned with her values but offers lower returns, or choose the second fund that provides better financial performance, albeit with a slight compromise on her values?

After careful consideration, Ana opts for the second fund. While she initially wanted to avoid coal-producing companies altogether, she’s reassured by the fact that the fund is actively working to make these companies more sustainable. It’s a middle ground that allows her to meet her financial goals while still making a positive impact.

Finding the Right Balance for Your Sustainable Investments

Ana’s story highlights a key point: making your savings more sustainable doesn’t have to be an all-or-nothing decision. You can create a strategy that balances your financial preferences—risk, return, and liquidity—with your sustainability motivations—impact, value alignment, and ESG integration.

Sometimes, you may need to compromise on one to achieve the other. The key is to prioritize what matters most to you for each money pot and decide how much you’re willing to adjust your financial expectations to support your sustainability goals.

Ready to Take Your First Step?

Now that you have a clearer understanding of how to make your savings more sustainable, you’re ready to take your first step! Start by looking at your own money pots and thinking about how you can align them with your personal values.

In the next article, we’ll guide you through identifying financial products that match your sustainability motivations and preferences. Let’s continue this journey and transform your savings into a force for good!

(Written with the assistance of Chat GPT.)