Saturday , May 25 2024

The simple guide to investing ethically

With a growth from £1.6bn to £7bn in the ten years between 1997 and 2007, ethical investments are on a steep rise.  And with an increasing interest in climate change and the world around us it’s really no surprise that everyone from City bigwigs to those with just a few hundred to put away want to be sure that their money is being put to good use and is in the kind of investments that are going to last in a changing world.

There are main strategies in ethical or socially responsible investment:

Negative Screening: Known as dark green funds, funds that use negative screening take out those investments considered ‘unethical’ by the fund manager.  These tend to include tobacco companies, alcohol producers and arms manufacturers.

Positive Screening: These funds specifically seek out those companies to invest in which are making positive contributions – recycling, water purification or producers of alternative energy sources.

Engagement: Rather than directly investing in the ‘good’ engagement investors buy funds in companies before using this financial power to press for change.  As an example the fund may seek to persuade an oil company to use cleaner practices.

While engagement strategies allow the same choice of investments – in theory – as an ‘unethical’ fund there is an argument that screening strategies leave a fund manager with far fewer options in which to invest.  Meanwhile an engagement strategy may, in the long term, have little effect depending on the success of the investor’s plight.

In order to pick the right ethical investment for you you might choose to approach one of the still small number of independent financial advisors (IFAs) specialising in ethical investments.  A clear view can also be gained from specialist services the Ethical Investment Research Service (EIRS) or the UK Social Investment Forum (UKSIF) both of whom can direct you towards an advisor with knowledge of ethical investment and give good advice in socially responsible investment generally.

For those inexperienced in investments it is inadvisable to take the responsibility of investing in stocks on alone.  Particularly when it comes to investing ethically which remains often a very cloudy area an advisor should always be used when choosing stocks or, even better, a fund manager who will have a prior knowledge of potential investments hired.  However, if you do wish to invest without assistance there are websites, including, which can offer a comprehensive overview of investments to approach and avoid to be sure to keep your cash out of questionable sources of investment.

A clearer way be sure that your money is being used in a transparent way is to simply abandon traditional savings and current accounts for those which guarantee to trade responsibly.  Among those banks which are noted for their ethical accounts are The Co-Operative and Triodos although it should be remembered that one person’s view of ethical may not be another’s – be sure to read up on exactly how your money will be used to ensure you agree with the bank’s policies before signing on the dotted line.

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About John R Crawley

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