Finance expert Felix Beck has unveiled his new guide to investing responsibly and ethically. Find out more about what ethical investment is, how to find ethical investment opportunities and seeking out companies that share your values below. Read Felix Beck’s guide below.

Felix Beck’s guide to socially responsible investment opportunities

Ethical investment is all about using ethical principles when sourcing suitable investment opportunities. One entrepreneur’s approach to investing ethically may be somewhat different to another’s. Although the term ‘ethical investing’ is often used as an alternative to ‘socially conscious investing’, there are considerable differences between the two. Ethical investing tends to mean investing in line with one person’s specific set of ethics, whereas one set of guidelines is normally followed to make socially conscious investments.

What might an ethical investor avoid?

The viewpoints of ethical investors can vary dramatically. However, many ethical investors tend to sidestep opportunities linked to alcohol, smoking, weapons and gambling. An ethical investor may also choose to only work with companies and entrepreneurs that share their values. They may look closely at a company’s history to see if they have strong ethical similarities. Some investors have strong environmental concerns, whilst others have deep religious beliefs. It’s common for investors to seek out opportunities that don’t compromise their political affiliations. Ethical investors often carry out intense research to ensure opportunities don’t conflict with their values.

The history of ethical investment

It’s common for religion to influence the activities of ethical investors. The Quakers of the 18th century are regarded as some of the earliest ethical investors. Members of the Quakers were prohibited from being involved in the slave trade. Islamic investors often sidestep opportunities linked to gambling, alcohol and certain meat products. During the 1960s and 1970s, many ethical investors avoided working with companies that had benefited from the Vietnam War. In the 1990s, growing numbers of ethical investors started to pour their money into eco-friendly companies supporting sustainability.

Look for genuine commitment to ethical business practices

Many companies claim to promote ethical values, but this doesn’t always mean they are truly committed to them. The controversial energy, commodities and services company Enron once published a lengthy document on their commitment to ethics. However, they were later found to have violated a range of their own policies as well as several laws.

How to invest responsibly

Although the primary aim of investment is to make money, it can also benefit society in many ways. Many investors seek to work with companies that make valuable contributions to society, such as businesses known for treating their employees well, paying a living wage or making a big commitment to sustainability and using clean energy. If you lack the time or expertise to identify companies that share your values, you can invest in ethical funds. 

Search for ethical investment funds 

When you invest in funds, you can put your money into several businesses that share your views. Funds give you the chance to invest in a diverse range of businesses. These can include enterprises from many different sectors. Fund managers often support companies in their quest to become more ethically responsible. If you care deeply about what you’re putting your money into, there are many suitable options available to you.

Is ethical investment right for me?

If you’re not seeking swift returns and want your money to have a positive impact on the world around you, responsible investing may well be right for you. It may not be the best match for your needs if you already have debts that need to be paid off first or need access to cash at short notice. The key to successful ethical investment is to put your capital into companies that not only share your values but are likely to do well in the coming years. Companies that are particularly attractive to ethical investors may include those that are taking clear steps to improve their impact on the environment and to boost diversity. Ethical investment is no longer a niche concern. Figures from the Financial Times say less than $2 trillion was invested sustainably in 2013. However, this figure had grown to over $31 trillion by 2019. It’s now thought that around a quarter of all funds are linked to sustainability.

Where could my money be going?

If you don’t think carefully about where your investment money is going, it could be used to support companies and sectors that don’t share your views. These may include not only alcohol and tobacco companies but weapons manufacturers, tax-avoiding companies and businesses that treat their employees poorly. Over recent years, growing numbers of people have been switching to ethical pension funds to avoid compromising their values. However, a study carried out by Interactive Investor found that 53% of respondents didn’t know whether their pension was invested in a way that matched their moral values. There is growing evidence that sustainable, ethical and responsible funds are starting to perform better than conventional ones. This means it’s perfectly possible to grow your wealth via investment without neglecting your principles.

Seek out ethical pension providers

Several big-name pension providers agreed to align their portfolios with net-zero targets in 2020. However, there is more to do according to Tony Burdon of the campaign group Make My Money Matter, who said much more needed to be done to ensure investment money was being used to tackle issues like the climate emergency. Mr Burdon said his group wanted to see funds being invested in companies focussed on “the likes of social housing, renewable energy, green infrastructure, healthcare, and education”.

Consider changing your bank

Another campaign group called Bank.Green allows you to quickly find out more about where your bank is investing cash. You can use their tool to get a report on your bank’s fossil fuel record. Research carried out by Triodos found that around 70% of UK consumers thought banks and finance companies needed to be clearer on where they were investing their customer’s cash. Around half thought these companies were being secretive about the industries that they invest in.

Felix Beck: more progress is needed

According to Felix Beck, a great deal of progress has been made in the field of ethical investment. However, he says much work still needs to be done on transparency so socially responsible consumers can get the peace of mind they require.

(The above story first appeared on LatestLY on May 10, 2021 01:38 PM IST. For more news and updates on politics, world, sports, entertainment and lifestyle, log on to our website latestly.com).