What is Ethical Investment?

What is Ethical Investment?

What is Ethical Investment?

Ethical investment is investment which explicitly seeks to take environmental, social and ethical issues into account. It is sometimes called profit with principle.'

Ethical investors usually favour business practices that are beneficial to the environment and human rights. Some investors actively avoid companies that are involved with weaponry, alcohol, tobacco, gambling or the military.

Positive criteria that an ethical investor might look for are a good safety record, openness about activities, pollution control, energy conservation and an equal opportunities employment policy.

The idea is that the investor or fund manager will choose companies that have the potential to do well both socially and financially. The roots of ethical investment can be traced back to the nineteenth century when religious orders such as Quakers and Methodists were concerned with issues such as temperance and fair employment.

In the early 1900s, the Methodist Church decided to invest in the stock market whilst avoiding companies involved in alcohol and gambling. This trend accelerated as more churches, charities and individuals began to take ethical considerations into account when investing. Friends Provident, which has Quaker roots, launched the UK's first ethical investment fund in 1984.

According to the Ethical Investment Research Service, around 6.7 billion is now invested in ethical investment funds in the UK. New research shows ethical investors rate climate change, biodiversity and pollution as their most pressing environmental concerns.

Far from having to compromise on financial return, changing buying patterns among investors demonstrate that it's possible to have the best of both worlds. Ethical investments often match or outperform their traditional counterparts.

There is now a virtuous circle' being developed among consumers, corporations and Governments which is increasing the demand and supply of environmental solutions. Ethical investment is now becoming one of the fastest growing areas in financial planning.

Companies which behave responsibly are, in the long run, also less likely to run into tangles with regulators, be involved in costly court actions, strikes or boycotts of their products.

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