‘Ethical Investment’ has many names including ‘green investment’, ‘socially responsible investment’, and ‘sustainable investment’. It addresses social, ethical and environmental issues (SEE) as well as considering pure investment ones. It is increasingly concerned with effective corporate governance.
The meaning of the word ‘ethics’ varies from person to person; and there are many ethical funds which have differing priorities and methodologies. It is important, at the outset, to establish which areas are of most importance to the investor.
More specialist investors might also wish to consider what approach they wish to take:
Understanding the underlying issues – the GBIM Approach
To assist clients classify their priorities GBIM separates ethical issues into three broad categories (clearly some issues can fall into more than one group):
Human (social) which can include alcohol, armaments, child labour, corporate governance (incl. executive pay), equal opportunities, gambling, health and medicines, human rights, military, pornography, repressive regimes and tobacco.
Animal (ethical) which can include animal testing, biodiversity, fur, intensive farming and meat processing.
Environmental which can include air & water management, climate change, energy, environmental management, genetic engineering, mining & quarrying, nuclear, transport and tropical hardwoods, waste & toxic chemical management.
GBIM selection of funds
There are a substantial number of green and ethical funds available, offering a range of options. GBIM considers, not just the investment performance of these funds, but also their individual characteristics and approach to the issues on which they focus.
Aided by standardised disclosure of information (for example the Eurosif Transparancy Guidelines) GBIM aims to identify the best solution to meet clients’ needs. We monitor performance, the corporate responsibility of the provider itself, and consider the investment implications of sectors which are overweight and underweight and the size of companies invested within the fund.
A significant number of investors may not want to maximise profit at all costs, they are happy to invest ethically even if it means a slightly lower return.
In fact, according to Investment Management Association research, investing ethically does not mean that you have to sacrifice performance. Companies that improve their corporate socially responsibility and sustainability (e.g. towards climate change) may perform more profitably in the long term. In addition, investors tend to be involved with emerging social and environmental investment themes at an early stage.
Please contact Mark Arkwright to explore your Ethical Investment options further.