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Is Performance Sacrificed If You Want To Invest Ethically?
By Mike | September 1, 2010
There are several investment vehicles such as unit trusts, open-ended investment companies (Oeics) and investment trusts (“mutual funds” in the USA) that can diversify holdings, generate a return and minimise investment risk. These are especially attractive to private investors as they give access to a professional fund manager whose task is to ensure the fund meets investment objectives, whether that’s income, capital growth, or a mixture of the two.However, many more investors are stipulating that their money should be invested in an ethical way, and although this demands careful selection of funds and managers, this stance need not compromise performance.
Investment funds can be flexible, depending on just how “ethical” you want to be.Generally, ethical funds will only invest in companies that can demonstrate a clear social, moral or environmentally responsible agenda. Different fund types adopt differing definitions of “ethical”. Socially Responsible investment (SRI) funds take a broader view and have a more liberal interpretation than full-blooded ethical funds. For example, an ethical fund would probably never invest in a company that practices animal testing, whereas an SRI fund would if the testing was for life-saving medicines. Some ethical funds are focused on a single-issue. Climate change funds are growing in popularity and will invest almost exclusively in companies that are building wind farms or solar power companies for example.
Anyone setting up an online trading account with either ethical or SRI funds will notice that they both vet companies before investing in them.Ethical funds tend to work on the basis of what they are absolutely opposed to whereas SRI funds will pick similar ethical paragons as well as companies they maintain could be persuaded to act more responsibly, thanks in part to the investment itself. There’s no reason why an ethical fund should not make a profit. Many investors trawling a fund supermarket looking for returns with a conscience have found that ethical funds perform just as well as conventional mainstream funds.You don’t have to give up performance by choosing to be ethical.
Topics: Market News |
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