Ethical investment has been around since the early 1980s, although in the initial stages the number of companies in which to invest was limited as many companies did not meet the negative screening requirements. This resulted in an ethical fund carrying a higher level of investment risk than a non-ethical fund in the same asset class, due to the limited number of investment opportunities.
Over the past 40 years, there has been a huge increase in awareness of global environmental issues and corporate social responsibility.
This has transformed the way businesses operate, resulting in the formation of new smarter and greener companies, companies that specifically concentrate on solving energy and environmental problems, and existing companies looking for ways to improve their practices.
This has opened up a whole new ethical investment arena for the fund managers of ethically screened investment funds, providing many opportunities that in the past would not have been available.
Everyone has their own concept of what is ethical, so it follows that there is not one simple answer.
Ethical screening of companies in which to invest spans a wide range of issues from environmental management and pollution, animal cruelty, factory farming, corruption and repressive regimes to pornography, the sale of tobacco and alcohol, the arms trade and more.
There are now over 60 ethical unit trust funds in the UK to choose from that undergo a range of rigorous ethical screens. These range from negative and positive screening which was the earliest form of ethical screening, engagement with companies that have the potential of improving their practices, best of sector company selection an example would be choosing the most socially responsible bank or insurance company and thematic selection of funds, for example environmental and renewable energy funds.
There are also opportunities to invest directly in more unusual and alternative investments such as re-cycling plants, wind-farms, solar parks, social housing, sustainable forestry and micro-finance.
By the very nature of more alternative investments, these are likely to carry a higher risk than unit trusts, however with our help we can guide you through the selection process to produce a bespoke investment portfolio that suits your ethical values whilst remaining within your risk profile and budget.
There are also ethical tax planning schemes available from time to time for example AIM portfolios, Enterprise Investment Schemes and Venture Capital Trusts.
Many ethical funds perform on a par with their non-ethical counterparts and some have shown above average performance, therefore you can make a profit without compromising your principles.
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