Ethical investing has been around for over 30 years; with the first ‘green’ fund launched in 1984.
While it might still seem a ‘fringe’ investment opportunity, it would appear that ethical socially responsible investing is now becoming increasingly perceived as mainstream investment. It’s losing its novelty factor and understood that many ethical sectors offer good growth prospects.
Why has ethical investing gained popularity?
Think about other activities that were once deemed as ‘fringe’ – for example recycling or buying fairtrade. Not long ago recycling was for hippies and fairtrade was for activists. Now we’re all dragging our boxes of tins and papers to the kerbside on a weekly basis and taking our reusable bags to the store. And no one bats an eyelid when they see fairtrade coffee and tea in kitchen cupboards and cafes around the country.
How ethical investing works
Ethical investment works in the same way as conventional investment, but with an added second layer. You still invest depending on your own criteria – whether it’s to grow your money, create an income or improve your financial health and just like conventional investing you have to be aware of risks and return on investment.
Once you’ve decided on this, you then add the second layer – ethical screening.
What is ethical screening?
Ethical screening is made up of positive and negative components. Negative screening outlines what you are NOT prepared to invest in such as tobacco, armaments, pornography, gambling, mayor polluters, nuclear power, oppressive regimes and animal testing. Positive screening outlines the sectors you’d like to actively support such as renewable energy, clean technologies, water, waste and recycling, reforestation, social housing, microfinance and climate change.
As with all things in life, it’s not quite as clear cut as that and you need to do plenty of research so you feel confident about your investments and avoid greenwashing. You’ll also need to be realistic about where you’re prepared to compromise.
The benefits of ethical investing
Ethical investing allows you to bring integrity into your life – it you can deeply about something you can literally put your money where your mouth is! The obvious benefit of ethical investing is the feel good factor. You can create a portfolio that fits in with your own values and principles and is in alignment with the things that you care about. And when a company, whose actions you support, performs well financially, it’s a win-win.
How Safehands can help
By establishing your investment criteria, ethical values and attitude to risk before discussing various investment products, we can help you through the minefield of ethical investment.