Ethical investing in funds
There are now many opportunities to express your ethical views when you invest your money. There are 50 ethical authorised funds in the UK alone.*
This factsheet explains:
• How ethical funds work.
• How they meet the ethical investment criteria.
• How to choose an ethical fund.
• The impact that investing ethically might have on performance.
How ethical funds work
Each ethical fund has a specific set of objectives. Typically, they aim to exclude investment in companies that pose a threat, for example, to the environment, to health or to human rights. However, you can also support good practice by choosing funds which focus on companies that are making a positive contribution, such as those whose products are environmentally friendly or that actively support community welfare. Many funds do both and take account of both negative and positive criteria when investing your money.
How ethical funds meet the investment criteria
A screening process is used to ensure that the companies a fund invests in meet its ethical objectives.
The criteria used by the investment fund manager will help you to identify funds that match your personal concerns. You can see a list of negative and positive criteria in the tables on pages 2 and 3.
Many ethical funds have a panel or committee responsible for setting the criteria and establishing an approved list of companies from which the portfolio manager can select investments. EIRIS, the UK’s leading independent provider of research into the ethical status of companies, also helps ethical funds with the ongoing monitoring of investments.
Some ethical funds also use shareholder pressure to bring about changes in company policy. By joining forces with other investors, these funds have successfully influenced several companies to improve their practices. This process is often called corporate governance.
*These 50 funds are classified to IMA sectors. For further information see: www.investmentuk.org/fund-sectors