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Ethical investment products

Ethical investment has become an established part of the market in many fields of investing and is now a realistic option for pensions too. It goes alongside the rise in ethically influenced purchasing decisions across many markets. In general, ethical and social considerations in purchasing are part of everyday life.

We’d welcome a discussion with any of our existing or new clients about what we can do in relation to an ethical investment or an ethically invested pension.

Ethical and socially responsible investments

As an investor, your own values can be reflected in the investment decisions made on your behalf.

Over the last 15 years, the range of ‘ethical’ and ‘sustainable and responsible’ investment options available to investors has expanded and broadened significantly. The term ‘Socially Responsible Investing’ (SRI) has been adopted to describe the wide ranging moral and values based decision making of individuals and company investors. This covers three broad areas:

  • The avoidance by investors of companies and products deemed unacceptable.
  • The positive selection of companies in which to invest based on their responsible management.
  • The positive influence exerted by investors on decision makers to behave in particular ways, based on social, environmental and sustainability issues or any other area of ethics.

You have a range of choices, from consideration of products that companies are involved in like tobacco, armaments and gambling to management issues such as environmental, social and governance related matters.

Is it new?

It’s not new – ethical investments have been available for 30 years and UK individuals have invested around £15 billion according to the EIRIS Foundation.

Is it risky or costly?

Depending on the type of funds chosen, ethical or socially responsible investing does not have to be riskier or give lower returns and does not have to cost more.

Why an ethical investment?

An ethical or socially responsible investment is an option for you if it is important that your lifestyle, values and interests are represented through your investment decisions. If you want to have a say in the kind of organisations in which your money is invested. Or to use the influence you have to encourage more responsible business practice.

Ethical and socially responsible investing offers options to address your diverse needs. These are in addition to the usual considerations of your tolerance for risk and capacity for loss.

Of course ‘ethics’ by definition can mean different things to different people. Our job is to help you to meet any ethical, social, environmental or religious issues that you would like us to take into account when looking at your investments.

Will it make a difference?

Ethical and socially responsible investing is not necessarily just about avoiding companies deemed unacceptable. It’s a chance to use share ownership to engage with company management to improve the way they treat their employees, suppliers and the environment.

Over the last 30 years this has had a positive influence: Introducing minimum wages in Asia and preventing female discrimination in the workforce. Fund managers will look to improve all invested companies, through their voting procedures, which will be undertaken on your behalf, in line with the underlying fund’s investment and SRI mandate.

How will it make a difference?

You will be supporting fund managers to engage in practices outlined below:

  • Responsible Engagement: Some fund managers focus on using their position as investment owners (mainly equity) to encourage investee businesses to improve their environmental, social and governance standards. These fund managers work with the objective of delivering better outcomes for investors and other stakeholders.
  • Themed Investment: Themed ‘sustainable and responsible’ investments focus on selecting companies in line with environmental, social or governance (ESG) themes. Some funds focus on a single issue (e.g. Water), whilst others have broader criteria (e.g. Sustainability).
  • Ethical Screening: Traditional ethical funds place significant emphasis on ‘values based’ criteria, which considers issues such as armaments, tobacco or gambling. Funds typically apply a combination of positive selection screening or negative avoidance based screening, to avoid or select stocks that meet the specified ethical criteria.

Ethical investment profiles

We have sourced four options in which you can invest depending on your particular interests. Two of them focus on leaders in positive change, whilst two are more focused on specific avoidance criteria.

The investments are informed by a range of ethical research providers. These are then evaluated by applying a qualitative overlay, to assess the fund suitability in terms of the ethical policy of the fund managers and their investment strategy and experience. This is followed by a detailed financial fund analysis to create an investment universe for the portfolios from which the investment manager can select.

Ongoing monitoring is carried out quarterly by the Ethical Oversight Committee. Ongoing investment, risk and ethical oversight via separate committees.

The four options each include a variety of considerations for social issues (employees, education, health and community), genetic modification (development) and animal issues (intensive farming, fur and overall welfare).

Profile A

Invests in funds that take a forward looking and responsible approach to environmental, social and / or governance (ESG) issues. Funds are expected to demonstrate that they are contributing towards more responsible business practices through their investment strategies.

Profile B

This profile invests in funds that stocks which manage sustainability related issues well – including green technology. It also provides some emphasis on socially responsible business.

Profile C

This portfolio invests in a wide range of fund options in which ethical – as well as social and environmental considerations are at the heart of the stock selection process. Funds are expected to demonstrate that they have a positive investment philosophy and avoid or select companies in line with published ‘ethical’ criteria.

They apply positive and, or negative ethical screening criteria (or equivalent). It will avoid armaments (strategic), tobacco production, gambling, pornography, (non-medical) animal testing, poor human rights practices, companies with poor management of environmental practices and impacts.

Profile D

This portfolio applies clear negative avoidance criteria which relate to a wide range of ethical, social and environmental issues. Funds must demonstrate that they select and/or avoid stocks in line with a comprehensive range of values based ethical screening criteria.

Additional avoidance criteria compared with profile C includes nuclear power and alcohol production.