Recently, the idea of ethical investing has come to the forefront of investors’ attention as we become increasingly inclined to align our investments with our personal values.
Ethical investing is an investment strategy with the objective of considering the ethical values of a company alongside their financial returns. Ethical investing has a powerful impact on the way businesses choose to behave and holds them accountable for the environmental and social consequences of their actions.
Typically, ethical investing involves:
- Negative Screening – ruling out companies and sectors that cause harm to people, the planet, and animals (for example: fossil fuel, tobacco, weapons)
- Positive Screening – prioritising investment in companies which make a worthwhile contribution to society or the environment (for example: renewable energy, healthcare, technology)
A common question asked is whether investing ethically means sacrificing returns. This is not necessarily true – there are many ethical funds which have outperformed their non-ethical peers in recent times. There is also evidence suggesting that screening out unethical companies leads to more resilient portfolios of well-governed, sustainable companies.
If you are passionate about ethical investing and would like further advice on where and how you can get started, feel free to contact one of our advisers.