What is ethical investing?

Ethical investing

Ethical investing has crossed over into the mainstream, as more investors choose to allocate their money toward companies whose practices and values align with their personal beliefs. These beliefs can be environmental, social, political or religious, for example.

Investors may wish to exclude certain industries or allocate their funds to sectors which match their ethical preferences. This can be achieved by creating an investment policy with specific rules which aim to avoid industries or companies that fail to meet the criteria.

INCREASED AWARENESS

Recent global climate protests have raised awareness, prompting people to question their (and corporations’) impact on the environment, which is transcending to their investment preferences. Divestment from companies involved with fossil fuel extraction exemplifies peoples’ desire to make a difference. Research shows that just under half (45%) of investors would move their money if they discovered it was invested in fossil fuels1.

Not new to the investment arena, ethical funds have been around since the 1980s. Demand has accelerated at pace in the last few years, as more vehicles and opportunities for investment arise. An increasing number of investors (66%) would like their investments to support companies that have a positive contribution to the environment and society1.

RESEARCH IS VITAL

There is clearly a growing movement towards greater mindfulness in ‘good’ investing. Research is important because even if a company’s mission statement reflects the values and beliefs of an investor, it is possible their practices may differ. Selecting investments based on ethics offers no guarantee of performance. An Independent Financial Adviser can help you navigate the investment options available.

 


1Triodos, 2019