Why ethical?
investing ethically
What is Ethical Investment?
Ethical investment is about positive change:
- It’s about engaging with companies to improve their environmental standards.
- It’s about talking to directors to encourage sustainability in their business practices.
- It’s about taking the fair trade message to the heart of the City.
Ethical investment covers pensions, bank accounts, savings, investments and some insurance products. The big difference is that an ethical financial planner links your concerns to the power of your money and works to a strong ethical code.
Ethical investment is said to have many roots. One was the decision of the American Methodist churches to invest in the market in the 1950’s. Previously they had seen this as gambling. Others say that retail funds started during the Vietnam War.
What is true is that Friends Provident started their Stewardship Fund in 1984 and it was the first UK collective investment that was ethically-screened. Initially it was nicknamed the Brazil Fund in the City of London - not because of a geographical bias but because it was seen as nutty!
It took two years of record growth before City financiers stopped laughing.
How well do ethical investments perform?
The performance of ethical funds compares very well with those that have no ethical screening. There is no reason or evidence to suggest that investing your money ethically will adversely affect the performance of your investments.
There are now over 100 ethical funds, therefore geographical and asset class restrictions are no longer an issue.
Investors without ethical concerns often hold screened-funds in their portfolios because of their performance.
Ethical investments enable you to avoid investing in companies that are involved in areas that may be of concern for you, for example:
- The production, sale and trade of arms and weapons.
- Animal experimentation and intensive farming.
- Tobacco.
- Alcohol.
- Pornography.
- Companies that trade with countries which abuse human rights.
- Environmental pollution.
- Nuclear power.
- The development and use of genetically modified organisms.
Instead, you can choose to invest in companies which may for example:
- Have good working conditions and policies e.g. equal opportunities
- Respect animal welfare
- Make a positive contribution to the community e.g. those involved in public housing, public transport, healthcare products and services (not animal experimentation).
- Demonstrate environmental initiatives including pollution control and investment in alternative energy.
- Be open about their activities.
- Promote organic farming.
