Have you ever stopped to consider how ethical your investments are? In the 21st century there is a growing emphasis on “going green” and otherwise helping to protect the planet on which we live; not only for our own personal future, but for the many generations yet to come. It is only logical that this thinking would eventually make its way into our investment portfolios whether in private pensions, ISAs or general savings. For the concerned individual and investor, this can only be a positive occurrence.
The UKs first ever ethical fund began in 1984. Growth and interest continued as people opposed the apartheid rulings of South Africa. There are now over 100 green and ethical funds that can be invested in. Many people would likely agree the worthwhile effect of investing in these funds if there was the chance to both make a profit and assist in the backing of ethical companies and projects.
Which investments should I avoid?
How you choose to invest – whether ethically or not – is a personal decision that can be made with the help of your financial adviser. If you are keen to invest ethically, there are a few types of companies which you may want to avoid; these could include those that:
Deal in the arms trade
Support oppressive regimes
Support tobacco companies
Pollute or damage the environment
Profit from gambling, pornography or the production of alcohol.
Which investments should I choose?
Your financial adviser should be able to gauge which type of ethical investment is best suited for you, but broadly speaking you may match yourself to one of the following outlooks:
Conscience decision investors: as a conscience decision investor, it is likely that your main priority is to avoid companies associated in activities you disapprove of. As shown above, this could be their support of tobacco companies or animal testing. If you fall into this category it might be advisable to rule out a number of “negative” investments before discovering which ones remain; this is known as negative screening.
Themed investors: a themed investor may actively seek out companies that – according to your beliefs – act positively toward society. Instead of ruling out “negative” investments, you might instead look directly for those you associate with. This is commonly known as positive screening.
Ethical investment and risk
As with any type of investment, you should consider the associated risk with your ethical choices. Your financial adviser will be able to assess your risk profile as well as finding investments that meet the criteria of other influential factors. This way you will be able to invest in a fund that suits your financial circumstances, stage in life, as well as your concerns and interests.
Charlotte Walker writes on a range of finance related topics, including private pensions.