|
You are here:
Ethical Investment Guide
|
|
|
|
|
|
|
|
|
|
|
|
|
Search
|
|
Concept
|
|
Ethical investing begins with your ideas and principles; what issues you believe
to be important. Just as different people have different views on the definition
of ethical, not all funds have the same objective.
|
|
|
|
Ethical Screening
|
Companies that are included in the portfolio of an ethical fund are at first 'screened',
a process that determines whether the company matches the fund's investment standards
and ethical policy. The investment objective of a fund may have a combination of
negative and positive criteria, in other words actively avoid those companies, for
example, that are known to harm the environment and invest in companies involved
in socially progressive business. Each fund should clearly state their ethical criteria
and provide you with information on the companies they invest in.
According to EIRIS, examples of negative criteria include: animal testing, gambling,
human rights abuses, military production and sale, pornography, alcohol, genetic
engineering, pollution and Third World concerns.
The areas of positive criteria include equal opportunities, environmental programmes,
conservation of energy, fair trade, education and training and support of community
projects.
|
|
Research
|
Most ethical fund managers choose their portfolio of investments from an approved
list created by a specialised research team. Some fund management groups have their
own in-house research panels, while others look to external providers for ethical
information.
The Ethical Investment Research Service (EIRIS) is the leading independent provider
of research into the ethical performance of companies and assists many management
groups in their investment decisions. In July 2001, the Financial Times Stock Exchange
(FTSE) with the help of EIRIS created a series of indices called FTSE4Good, which
aims to include companies with strong environmental and social records. This has
prompted some management groups to launch tracker funds based on the new ethical
indices, and requires little ethical research by the groups themselves.
|
|
Ethical or Socially Responsible Investment?
|
The origins of modern ethical investment can be traced back to the beginning of
the 1900's. The Methodist Church decided to invest in the stockmarket, purposely
avoiding those companies involved in alcohol and gambling. The church was also behind
the proposal for the first ethical trust in the UK in 1973, but it failed to win
approval. The first ethical fund was finally launched in 1984, by Friends Provident.
As the ethical investment market has developed, so too have its terms and policies.
If you have ever considered investing ethically you may have come across the term
of Socially Responsible Investment (SRI). Some believe SRI is interchangeable with
the more common term of ethical, while others believe there is a clear distinction
between the two. Those that think there is a difference describe ethical investment
as simply avoiding companies through negative screening and SRI as a process that
considers all companies for investment with the aim of encouraging change. This
inconsistency highlights that ethical investment can mean so many different things
to different people. Whatever the opinion the basic concept should be the same:
investment with environmental, social and ethical consideration.
|
Data provided by FE fundinfo. Care has been taken to ensure that the information is correct, but FE fundinfo neither warrants, represents nor guarantees the contents of information, nor does it accept any responsibility for errors, inaccuracies, omissions or any inconsistencies herein. Past performance does not predict future performance, it should not be the main or sole reason for making an investment decision. The value of investments and any income from them can fall as well as rise.
You are currently using an old browser which will not be supported by Trustnet after 31/07/2016. To ensure you benefit from all features on the site, please update your browser. Close