What are Ethical Investments?
Ethical investments – also called social investments, socially responsible investments and green investments – is a trend which has been widely referred to as the conscious use of investments to achieve social, ethical and environmental performance objectives, over and above the usual financial returns. The relevance of the ethical investment movement is found in its potential to deliver financial returns while also assisting in delivering on the countries social objectives, like environmentally sustainable development for example.
Types of Ethical Investment
There are essentially two types of ethical investment: shareholder activism and screened investments.
Shareholder activism is where groups of shareholders campaign for changes to what they perceive as unethical practices carried out by the companies they technically have a stake in, often by using the annual general meeting as a platform for their awareness and lobbying tactics. This category is defined as investors who have sponsored or co-sponsored resolutions on social issues in the last three years.
Screened investments typically include avoidance of investments in areas such as oppressive regimes, armaments, animal exploitation, tobacco, gambling and alcohol production. The converse might include purposeful support of investments in companies with a positive record in environmental awareness, employee welfare, or community involvement. This is an evolving field of investment which has grown to embrace over 300 different criteria, with gun control and biotechnology among the more recent issues to be factored in. This category of ethical investment has seen the largest growth of all.
Ethical investments have grown in popularity and now can be seen in many different sectors, with funds achieving several different aims from capital growth to regular income. If you would like to know more about how you can invest in a way which matches your own ethical views, speak to your local Independent Financial Adviser.
Please be aware ethical investments often carry investment risk, where you could get back less than your original investment. You should also take care many unregulated investments call themselves ‘Ethical Investments’. Unregulated investments do not offer the same level of protection as regulated investments and should be avoided.