The Evolution of Ethical Investing

Ethical investment has traversed into the mainstream, as people increasingly choose to allocate their investable funds toward companies whose values and practices align with their personal beliefs, whether they be environmental, social, religious, or political. Some investors may choose to eliminate specific industries or allocate to other sectors which meet their ethical preferences. This involves creating an investment policy with very specific rules aimed at avoiding companies or industries that don’t meet the criteria. Recent climate protests around the globe have raised awareness and prompted many people to question their (and corporations’) impact on the environment.

This heightened awareness is transcending to investment preferences. With many people asking what they can do to reduce their carbon footprint, redirecting their investments is one credible option. Divestment from companies involved with fossil fuel extraction exemplifies this; research shows 45% of investors would move their money if they discovered it was invested in fossil fuels1.

Not a new kid on the block

Not new to the investment arena, ethical funds have been around since the 1980s; client demand has accelerated at pace more recently, as more opportunities and vehicles for investment arise. Data reveals an increasing number of investors (66%) would like to support companies that have a positive contribution to society and the environment.

Impact insight

Another term to become familiar with is ‘impact investing’, this involves, not only the avoidance of businesses contributing to damaging activities, but actively supports companies bringing about positive change in and around their business and the wider
world, whilst demonstrating high levels of accountability and governance. This involves reviewing companies’ operating practices and selecting companies that are trying to solve social and environmental challenges. With an impact approach, investment decisions are based on a company’s impact evidence (data), rather than personal beliefs.

Navigate with certainty

Heightened public awareness, and appetite for how money and investments can impact climate change and other societal issues, means that there is undoubtedly a growing movement towards greater mindfulness in ‘good’ investing. Research is essential because although a company’s mission statement may reflect the values and beliefs of an investor, their practices may differ. Selecting investments based on ethics offers no guarantee of performance.

We’re here to help you navigate the investment options available.

1Triodos, 2019

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.

It is important to take professional advice before making any decision relating to your personal finances. Information within this newsletter is based on our current understanding of taxation and can be subject to change in future. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK; please ask for details. We cannot assume legal liability for any errors or omissions it might contain. Levels and bases of, and reliefs from, taxation are those currently applying or proposed and are subject to change; their value depends on the individual circumstances of the investor.

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated. If you withdraw from an investment in the early years, you may not get back the full amount you invested. Changes in the rates of exchange may have an adverse effect on the value or price of an investment in sterling terms if it is denominated in a foreign currency. Taxation depends on individual circumstances as well as tax law and HMRC practice which can change.

The information contained within this newsletter is for information only purposes and does not constitute financial advice. The purpose of this newsletter is to provide technical and general guidance and should not be interpreted as a personal recommendation or advice.