Ethical Investment: What’s Important To You?

Jan 04

Ethical investment is growing in popularity. Triodos, a bank that specialises in ethical investments has seen a 78% increase in customer enquiries for saving accounts since July, and the number of people switching accounts to the Co-Operative Bank has increased by 43%. UK investors now hold £11 billion in Britain’s green and ethical funds, up from £4 billion ten years ago, according to the Ethical Investment Research Service (EIRIS), the sustainable investment research specialists. However, it can be complicated; it is a grey area primarily because what is ethical and what is not is not defined by anyone other than the company itself. It all comes down to values, what is unethical to one person may not be to another. Therefore, you have to do the research yourself and decide what you think are acceptable businesses for investing money in. So how do you go about it?

Negative Screening

This is where a funds manager screens the companies that are involved in activities that they find unacceptable and unethical. The problem lies in what is considered unethical. Generally speaking, most include gambling, alcohol, tobacco and arms manufacture within this, but some also specifically include pollution of the environment and testing of products of animals.

Positive Screening

This technique selects companies on the basis of what activities they engage in, such as recycling, alternative energy sources like wind turbines or a solar panel company, or water purification.

Engagement Funds

This is where stakes are purchased in a company to be used as a lever to change the way the company operates. This type of investment needs careful consideration of whether there is enough potential for improvement.

Ethical Ambiguity

Recently, F&C Investments had to defend themselves against scrutiny when ethical management advisor Barchester Green Investment released a report that revealed that the F&C Stewardship Growth Fund has 1.6% of its money in Burberry.

Burberry regularly comes under attack from animal activists like PETA because of its use of fur. They use fur in their products, even though it is generally agreed that fur is unethical, and many leading clothing retailers do not use fur. However, F&C’s ethical criteria states that if the company gets less than 1% of their revenue from fur, then it is acceptable for the fund to invest in Burberry because they only 0.2%.

Find The Right Ethical Investment For You

As with a normal investment, you must think about what you want your money to do, how long you want to invest it for and how much risk you’re willing to take. Then think about the ethical considerations, what issues are most important to you and where you are willing to draw the line. You’re unlikely to find an investment that is perfect, but if you do the research you should find something you’re happy to invest in.

Seek Advice

Unless you’re an investment banker yourself, it’s unlikely that you know enough to make the best informed decision for you. Your Wealth UK is a company that can offer advice on ethical investing, as well as whole range of other financial products including mortgages, tax trusts, insurance and pensions.