Ethical investments

[Secretsantaofficefairy]

We have some money to invest for our dc - low six figures. Dh is strongly ethically minded and doesn’t think the stock market can ever be ethical unless you invest only in progressive funds (ie not ‘ethical’ funds which just work on a principle of excluding arms or fossil fuels). Such funds are obviously higher risk.

both of us strongly disagree with becoming BTL landlords.

This is our dc’s nest egg and likely to be their only inheritance but if we leave it in a bank it will only decrease in value.

i know there are ethical advisors but we don’t have enough money to make an IFA worthwhile.

does anyone know of any green or ethical investment websites or forums where we could go for advice?

TIA

Is this your child’s money that you are managing? Or money left to you that you are deciding to give to your child?

If the former, I’d do what would generate the highest returns without my personal view on the stock market affecting it (does your DH not have a pension either?).

Thank you for your reply. This is money gifted to me by my parents that I want to invest for dc. On one hand I want to make the most out of it that I can; on the other hand, i don’t want to compromise the beliefs we live by. And I don’t feel comfortable lying to my dh about it either.

Oh I wasn’t suggesting that you lie.

If it’s your money that you are giving to your child then I wouldn’t feel like you had an obligation to get the best return (which I would if it was his money you were managing).

Maybe have a look at Triodos, or the Ecology Building Society. I think they both seek to actively promote good practice, and the second puts the money into building green affordable homes.
Previous posters have implied that ethical will bring a lower return, but these funds can do better long term, because the companies they invest in are likely to have better governance and are thus less exposed to crashes. Fossil fuels really aren't looking good long term. Just my opinion, and others will differ.

Op to invest safely you need to spread the money around in many many companies ,sectors , and countries.

Id very extremely worried that you will loose their money by putting all their eggs into one basket

Id look at some other way to grow it

Id also be wary about possibly sacrificing your DC future security
on the altar of your DH "principles "

Kids have an incredible head start with compounding ,the 7th wonder of the world !

Something else you can do for them is to open up a sipp.
Self invested personal pension , 2800 max each year you can add. But a pound invested when young woerh a lot more than invested later

One Family are pretty ethical. I put my child's trust fund gov payment there 16 years ago and it went into an 'ethical' stocks and shares pot. They invest in companies based on their climate impact score.

Sorry for jumping to that conclusion! I think I was just playing it out in my head and imagining what dh would say to do under different circumstances

thank you for your comments x

Amazing , thank you

Triodos has quite a few options.
And good on you for planning to invest ethically. The world would be a much better place fur our children/grandchildren if more of us took this stand.

Edit: I linked to a paywalled website, sorry!
There are ethical investment guides, not all of them subscription only 😳

Ethical investments - and funds focused on women, which often are the same ones - have a good performance history. Usual caveats apply, natch.

Where is his pension invested? Can you mirror that?

I work in a financial advisers, and we have many clients who want to invest in ethical funds only. An adviser will do the work for you and check what funds suit your requirements.

A low 6 figure sum and you think you can't afford an IFA? I went to one when I wanted to find an ethical S&S ISA to pay into monthly (albeit 25 years ago). There was no upfront fee, they receive a tiny proportion of the income each year. Does it still work like that?

Some ethical funds are more proactive than others. It's not just about avoiding tobacco or arms manufacturers.

Depends what you mean by 'ethical' and what your expectations are for the investment returns.

Many large platforms will have access to ESG screened ETFs. Assessing against a set of 'ethical' criteria and likely removing defence manufacturers, tobacco, mining etc. If you are happy with that kind of thing then there are plenty of options available where you can review the key fact sheets before you decide to make any decisions.

There is an argument that some of the above is a box ticking exercise, which may or may not be accurate. For example there are many big companies that are probably within ESG screened ETFs , Amazon, Google, Meta. Are they ethical by your standards?

I think you need to try and understand what your balance is between ethical and commercial returns.

A possibility you might find interesting to look into is Shariah compliant investments (they are open to anyone - not just Muslims). They are designed to be both socially responsible and ethical investments.

Rather unique features:
-Returns must come from profit-sharing, rental income, or actual business performance. Investments are tied to tangible assets or real economic activity. Excessive debt and financial engineering are prohibited.

-Contracts must be clear and transparent. Highly speculative investments, for instance some derivatives and ambiguous contracts, are not allowed and neither are investments resembling betting or games of chance such as speculative trading and certain financial derivatives.

-Ethical screening to avoid alcohol, gambling, adult entertainment, weapons and many other activities considered harmful or unethical.

-Companies in Shariah indices keep debt levels below certain thresholds (often around 30–33% of total assets or market cap, depending on the standard).

-Islamic financial institutions typically involve scholars who ensure their product complies with Islamic law and provide ongoing monitoring.

On past performance these investments seem to show broadly similar performance returns to global trackers over time. They seem to be less volatile and show resilience during times of crises primarily due to their avoidance of companies with high debt levels.

Sharia compliant investments are available on mainstream platforms such as Hargreaves Lansdown, Aviva and HSBC, as well as dedicated platforms such as Islamic Finance Guru and Wahad Invest (which offers robo-adviser investments and also a Shariah compliant SIPP).