People think that investing ethically is just about supporting companies that are ‘green’. It’s not. It’s much more than that. It’s also about supporting companies that avoid investing in certain activities such as pornography, armaments or gambling and companies that look after their own staff and make positive contributions to society.
Everyone has a different opinion on this so choosing the right type of ethical investment for you can be a minefield. Each fund manager has their own criteria that a company must meet and there are different strategies for assessing this. These include:
- Engagement – No company is excluded from investment. However, the fund manager will engage with the company to encourage them to make environmental or social improvements.
- Best in Class or Preference – Ethical guidelines are applied to give a preferred selection when all other factors are equal i.e. financial performance. So, a fund manager who wishes to invest in retail companies may use companies with the best track record for sourcing ‘fair trade’ products.
- Screening – This method is stricter. Companies are completely excluded from selection because of their involvement in certain activities. This approach also applies where companies are included for positive contributions to society and the environment.
You can see that it’s not just about which sector the money is invested, but also about how the fund manager selects the investments.
So investing ethically isn’t just about being a hippy and endorsing the virtues of the Toyota Prius, it’s also about promoting positive contributions to society and the world.
This article is for general use only and is not intended to address your particular requirements. It should not be relied upon in its entirety and shall not be deemed to be or constitute advice.
GreenSky Wealth Ltd is an appointed representative of Financial Limited which is authorised and regulated by the Financial Conduct Authority. FCA No: 516410