What’s the best thing you can do with your money to help save the planet? Studies suggest that the most powerful tool you have is the value of your savings. The cumulative impact of your money over decades can be extraordinary.

Pensions may sound boring but, over your lifetime, your pension is likely to become your biggest financial asset – government statistics say it accounts for 42% of wealth in the UK.

What does this have to do with the climate? Pensions are usually invested on your behalf in a small number of publicly traded companies, including those that produce fossil fuels.

According to a study conducted by the insurer Aviva for the United Kingdom Make my money count campaign, the average UK saver can reduce carbon emissions by 19 tonnes a year by switching to a sustainable fund – 21 times more than the combined carbon savings of using renewable energy, eating vegetables and of non-theft.

Developing good financial habits early could be one of the most powerful levers you have to make an impact, either by engaging with the companies you invest in to improve their climate policies, or by avoiding high-polluting companies altogether.

If you have a bank account, first check the bank’s climate policy as they will use your money to fund other activities. Some banks avoid fossil fuels and channel your savings into positive social impact projects.

Investing gives you more influence over the management of your money. First, talk to your parents because they can invest for you, says Becky O’Connor, co-founder of personal finance website Good with Money and head of pensions and savings at the Interactive investment platform. investor.

The UK government has paid £250 into a Child Trust Fund for everyone born between 2002 and 2011, with parents often funding the account. Once you turn 16, you can control the fund and choose investments, or transfer it to a tax-free Individual Junior Savings Account (Isa), which offers more flexibility.

Developing good financial habits early could be one of the most powerful levers you have to make an impact.

At 18 you can take control of all your own financial accounts, and possibly also consider a Lifetime Isa, where the government will increase your contributions by 25% – but various conditions apply.

Under the UK government’s auto-enrollment rules, it’s likely you’ll start contributing to your pension when you’re 22 and working full-time. This is invested for you, but most private sector pension plans have default funds that invest in all sectors, with an ethical strategy option.

If you live in the United States, your parents may have created a UGMA account for you under the Uniform Gifts to Minors Act, which will be transferred to you when you turn 18 or 21 (varies by state) . When you get your first job, you might consider contributing to a traditional or Roth Individual Retirement Account (IRA).

Nilay Gandhi, CFP, senior financial advisor at Vanguard Personal Advisor Services, says Roth IRA accounts are popular with early-career people.

As FT journalist Alice Ross points out, in Invest to save the planetinvestment decisions are personal and depend on when you think you need the money and how much risk you are willing to take.

“ESG” has become a catch-all term, but interpretations vary

You probably want to start with funds – pooled investment vehicles professionally managed on your behalf, containing stocks (shares of a company), or bonds (loans to a company), or other assets. Some funds have a manager to make investment decisions for you, known as “asset” investing, while others simply track assets in a selected area – known as “passive” investment.

“ESG,” which stands for “environmental, social and governance,” has become a catch-all description of responsible investing through a fund, but interpretations vary.

Felix Milton, certified financial planner at Philip J Milton and Company, says there are four main fund choices for climate-conscious investors: those that exclude certain industries; those who rank among the “best in class” according to ESG measures; those with an activist approach to driving improvements; and impact funds, which invest directly for positive change.

There are apps – called robo-advisors – that will select funds for you. Holly Mackay, founder and chief executive of consumer website Boring Money, suggests looking at Clim8, an app with a mission to support environmental innovation that will manage a climate-friendly wallet for you with a minimum deposit of £25. She also says The Big Exchange investment platform is worth considering because it helps people save in a way that aligns with their values.

But beware of “greenwashing”: funds presenting themselves as “ESG” without investing in a sustainable way. And beware of any fund that claims its ESG approach will deliver better returns than its mainstream peers.

While many have performed well during the pandemic, ESG funds have struggled this year as energy prices surged and the prospect of higher interest rates made investors less willing to pay high valuations for “growth” stocks, which are widely held by many ESG funds.