Ethical saving and investment
So, you've got some money saved or you'd like to start saving - probably in an ISA (which is the best bet for your savings, at least until you've reached the limit you're allowed to invest in each tax year). But you really, really don't want it to be used for things you don't approve of, such as tobacco products, pornography or anything that involves animals being used as testers.
Ethical saving or buying into ethical funds (including for your pension) is perfectly possible, but you need to do a bit of research.
What do you think of as 'ethical'?
Have a think about your criteria. What are you specifically against, or specifically in favour of? Ethical investment funds work by being managed according to certain parameters: like all funds, the managers are looking for a high yield for your money. But with an ethical fund, the manager will have screened out some companies as 'no-gos' for investment. So however profitable they are, your money won't be used to buy shares in these companies.
It's not all about cutting 'unethical' companies out. Some funds operate by their managers screening in favour of companies that are seen as making a positive contribution to the environment, for example.
There are different 'levels' of investment fund - sometimes they're referred to as 'light green' (ie these funds cut out the companies most likely to be seen as ethically questionable, for example companies involved in weapons manufacture) or 'dark green' (ie funds that invest only in companies with the highest possible ethical guidelines and activities).
Will you make as much money from ethical investment?
Possibly not. Because ethical funds can't invest anywhere they see potential profits, they may not perform as well as ordinary funds. Having said that, ethical funds have generally performed better recently than they have done traditionally, but obviously, that could change again.
The savvy option is to strike a balance between principles and profits. So if you're investing in an ethical fund, make sure you keep on top of its performance. And before you invest in a fund in the first place, look at its profits over several previous years.
Get independent financial advice
If you have a reasonably large investment to make, think about getting some advice from an independent financial adviser who specialises in ethical funds. Start by visiting the Ethical Investment Association site.
Disclaimer: Any content in our family money section is intended as general information only. For specific advice about your personal financial situation, get advice from qualified, independent, regulated professionals.
Last updated: about 2 years ago