Ethical Investments: A Guide for the UK Investor

In recent years, ethical investing has gained significant traction among investors who aim to achieve financial returns while also supporting environmental, social, and governance (ESG) principles. The concept has evolved beyond mere exclusion of ‘harmful’ industries like tobacco or firearms to a broader approach of positively influencing the corporate landscape. If you’re looking to align your investments with your values, here’s what you need to know about ethical investments in the UK.

Understanding Ethical Investments

Ethical investing is a strategy wherein the investors’ financial goals align with their personal values. This investment approach involves screening potential investments for their impact on society, the environment, and governance practices. This could range from investing in companies that have strong sustainability credentials, to those actively working to improve their environmental and social impact.

Some commonly used terms in this sphere are sustainable investing, social responsible investing (SRI), and impact investing, each differing slightly in methodology and impact criteria. The United Nations-supported Principles for Responsible Investment (UN PRI) is a global network of investors working together to put the six Principles for Responsible Investment into practice.

Selecting Your Ethical Investment Path

Before diving into ethical investments, it’s vital to define what ethics means to you. Consider aspects like environmental preservation, social justice, or corporate accountability. Here are steps to get you started:

• Define Your Values: List out areas most crucial to you. This could be climate change, human rights, or even specific industry behaviours like gambling or tobacco.
• Research: Use resources such as the Morningstar Sustainability Rating to find funds or companies aligned with your values.
• Screening Strategies: Decide your screening approach—positive, negative, or ESG integration. Positive screening involves selecting companies that lead in ESG performance. Negative screening involves avoiding companies or sectors that do not meet your ethical standards. ESG integration involves the systematic inclusion of ESG risks and opportunities into traditional financial analysis.
• Consult with Experts: Consider working with financial advisors who specialize in ethical investments.

Platforms and Funds for Ethical Investing

Many platforms and funds now cater specifically to ethical investors. Below are examples:

• HL Select UK Growth Shares fund which invests in UK companies with good governance and social practices.
• Triodos Bank offers a range of ethical investment opportunities, including sustainable equity and bond funds.

When choosing a platform or fund, it’s essential to review their investment policy to ensure it aligns with your ethical criteria. Read fund reports and updates to see how the fund’s ethical objectives are being achieved.

Monitoring and Reviewing Your Investments

Monitoring your ethical investments is crucial to ensure they continue to meet your values and financial objectives:

• Regular Reviews: Conduct regular reviews of your investment portfolio to check for any shifts in company policies or practices that might conflict with your ethical standards.
• Stay Informed: Keeping up-to-date with news and developments related to your investments will help you make informed decisions.

In Conclusion

Ethical investing allows you to contribute positively to the world without compromising on financial returns. By carefully selecting and managing your investments, you can ensure your portfolio not only benefits you financially but also contributes to the sustainable and equitable growth of society. Begin your journey in ethical investing today and make a difference to the world of tomorrow.