Ethical investment opportunities can offer you the chance to keep your investments in step with your conscience, but they need not cost you the earth.
The credit crunch has made many more of us sit up and take notice of our money and the way in which it is being dealt with on our behalf. However, according to a recent Yougov poll 55% of UK investors did not understand clearly the companies and causes their investments were supporting, and 36% said that they would like to know more about investments designed to bring social and environmental benefits, as well as good returns.
What are ethical investments?
The word ethical will mean different things to different people, even in the context of investments, and finding the right ethical investment option will depend on your definition of the term. For example, you may consider investing according to your attitude to environmental or social ills or a combination of both.
You will usually invest through a managed fund where your capital will be pooled and invested on your behalf according to predetermined ethical guidelines. There are usually a range of different funds available on the market offering many different types of ethical investment, you will need to consider these carefully in order to find a fund that is right for you.
It’s always a good idea to know exactly how your money will be invested to ensure that your investments fit with your ethical principles. Do the research and don’t make assumptions based solely on the labeling of an investment product or fund.
Which type of fund?
There are two main types of ethical investment fund, those that use positive screening and those that use negative screening.
Negative screening means that your fund manager will seek to avoid investing in companies that may be associated with practices that you may consider unethical.
Positive screening means that your fund manager will actively pursue investing in companies that have what you may consider to be a positive investment impact.
Some pension funds will also offer an ethical investment option, and you may want to ask your pension provider whether ethical investment option are available to you.
Investing ethically will often mean balancing your desire for a good rate of return with ethical principles that are important to you. Sometimes this will mean sacrificing some of the best investment rates available on the market, but ethical investments can still bring decent rates of return, that, when coupled with peace of mind, can be priceless.