Ethical Investing – 7 big questions

May 10, 2016

In a recent blog we looked at the case for ethical investing. If you’ve decided that your conscience is going to rule your wallet, there’s a bit of work to do before you can skip carefree through a field of daisies.

It’s certainly not straightforward. Dust off the angel and the devil on your shoulder and probe your own thoughts on ethical finance:

1. What does ‘ethical’ mean to you?

There are many ethical funds to choose from, and all work to a slightly different criteria. Many screen out the obvious – businesses involved in alcohol, tobacco, pornography, nuclear energy and animal testing. But you need to get tough with yourself. Do you want to steer clear of alcohol even though you enjoy a glass of red with your steak? What are your views on animal testing for medical purposes?

What about weapons, mining, human rights or gambling?

2. Do you want to completely avoid certain industries?

You could choose instead to actively support particular activities, or even encourage questionable companies to change their behaviour. Some funds will invest in companies that harm the environment and then, as shareholders, agitate for change.

3. Would the motive of a questionable activity affect your decision?

You might decide to avoid all weapons manufacturers. But what about a company that only supplies weapons to the UK military? Would you feel safe in a country that had no weapons to defend itself?

4. Does the percentage of a company’s controversial business affect whether you would invest in them?

What about a cosmetics giant that only derives 5% of its profits from products that are tested on animals? Or a company that makes cleaning products that were historically tested on animals but no longer are?

5. How important is a company’s environmental record?

Would you avoid all companies involved in fracking? What about an oil company with a good track record on environmental issues?

6. What are your views on climate change?

Will you only invest in renewable energy producers? Or would it be enough for you if a traditional energy supplier claimed they were committed to exploring renewable energy?

Car manufacturers and airlines all contribute to pollution. Are they all off the table?

7. Are you holding a financial grudge?

If you’re a ‘banker basher’, do you want to avoid handing over your money to all financial companies even if that could diminish your returns? Could you invest in a payday lender that charges astronomically high interest rates?

We’re here to help

These are all tricky questions that need some thought before you can sensibly choose an investment fund to match your profile. Of course, only you can answer them but once you’ve decided on your ethical investment boundaries, we’ll be here to help you navigate to the right investments for you.

 

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. The value of your investments can go down as well as up, so you could get back less than you invested.  

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