Green and Ethical Investment Products

Ethical Funds

According to the Ethical Investment Research Service (EIRIS) over 700 000 people in the UK now invest in green and ethical investment funds.

There are now more than 90 UK ethical funds with almost £9 billion invested in them, which may be ISAs, Unit Trusts, OEICs (open-ended investment companies) or investment trusts. Ethical Bonds and Pensions are also available.   

Investment Criteria

Each fund has its own assessment criteria for making investments, in addition to its financial characteristics. Some funds focus on screening, while others seek to improve the social, environmental and ethical performance of companies in which they may invest. Some financial institutions are developing corporate social responsibility and environmental policies to run alongside their investments.

Exclusion Criteria

A number of funds operate according to very strong principles, excluding a large proportion of leading companies from their portfolio - and therefore a significant proportion of the stock market. They tend to invest in small and medium-sized companies and may offer a higher level of risk or volatility. However over the long term such funds can still demonstrate good performance while investing in innovative companies.

Other funds may simply avoid companies that do not meet their criteria - e.g. involvement in the arms trade - and invest in largely mainstream companies without seeking to change their policies.

Dialogue

Yet other funds may invest in a broad range of sectors including oil and mining, but enter into dialogue with companies to ascertain how they plan to develop in the future. They may also work to influence company policy and encourage positive change, based on the views of their investors.

Guidance on finding the right fund and institution to match your personal values and your financial needs is best provided by a financial adviser with specialist knowledge of the ethical and socially responsible investment market.

Ethical Pensions

Occupational Pensions

Since July 2000 the trustees of an occupational pension fund must declare in its Statement of Investment Principles, what extent, if at all, they take ethical, social and environmental factors into account when instructing investment managers on behalf of pension members. They are not obliged to include any ethical screening although some now do so.

If you are a member of an occupational pension scheme, you may like to enquire about what policies your scheme has adopted, and how the effectiveness of these policies is monitored.

Personal Pensions

Ethical fund choices have been available for some time on many personal pension and stakeholder pension plans.

There are many other financial products in addition to pensions. Some banks and building societies have clear ethical and environmental policies and offer services including current accounts, cash ISAs and savings accounts, mortgages and other lending facilities.

Ask a Financial Adviser for more details.