Investing for the future is important – but it may be just as important to make sure that there is a future to invest for. You may not want to join Extinction Rebellion and take the struggle to the street, but you may want to make sure that your investments benefit the planet.
At Continuum we can help you do that with Ethical Investing.
What is Ethical Investing?
Ethical Investing is a term that covers various forms of sustainable investment. It includes Environmental, Social and Governance (ESG) Socially Responsible Investing (SRI) and impact investing.
These are all slightly different, but all aim to exclude activities that are considered harmful to society and the environment and to invest in organisations, companies and projects that operate in a way that is sustainable for the future. In the past, this was seen as a minority activity, reserved for those who could afford reduced returns in exchange for maintaining their principles. But it has become mainstream, as investors are realising that you no longer have to accept a lower rate of return if you want to take a moral approach to your cash.
There is an estimated £19 billion invested in ethical stocks in the UK alone. Globally the figure may be $80 billion
Some ethical investors still exclude the entire “sin share” sector such as tobacco, gambling and arms manufacturers — from their portfolios.
ESG (environmental, social and governance) investing can exclude stocks with unsustainable or environmentally or socially undesirable business operations, but also looks for traditionally outlawed companies that have evolved to work in a different way. Businesses that are committed to workplace equality and social development in their overseas operations might fall into this category.
A third option, impact investing, seeks out companies dedicated to turning society’s needs into long-term business opportunities while producing a financial return, such as building affordable homes, or electric vehicles.
Ethical investing is intended to reduce the investment available to businesses and sectors that produce negative results for the wider world, and boost the capital available for businesses that help create a positive outcome as well as profits.
Can it really deliver competitive returns?
Ethical Investing was a factor of Quaker and Methodist money management as long ago as the 1800s, and started to become a feature of mainstream investment in the latter part of the last century. In those early days ethical investors might have had to console themselves with the belief that money is not everything, and that there would be penalties for following their principles, but this is no longer the case. There has been a significant change in attitude among professional investors in recent years, with the amount of money invested in ethical funds rising steadily.
This may be partly because of a growing understanding of the need to make changes to society, and the realisation that investing in businesses committed to supporting change may be the best way to bring it about. But it also reflects the fact that Ethical Investing can now be done without any financial penalties. The balance may shifting. Responsibly managed firms which demonstrate a concern with social and environmental responsibilities may offer the best prospects for future growth.
How can you start Ethical Investment?
When Ethical Investing was a new idea, it used to be necessary to examine every stock in a portfolio to filter out harmful activities (negative screening) and to invest in companies that are committed to making a positive impact (positive screening).
Fortunately, it is no longer necessary to do all the research yourself. There are many ethical funds, and it is not only possible to invest in the ethical sectors that are of interest to you, it is possible to select the investment style -from Cautious to Adventurous – so you can choose a level of risk that’s right for you.
In fact, with so much choice available, it can help to have an investment expert who can provide the support and guidance you need. At Continuum we have the investment knowledge in order to help create a bespoke wealth management portfolio suited to you.
The future starts today – so why wait any longer to give us a call about investing to make it better?
The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable investment strategy, you should seek independent financial advice before embarking on any course of action.
The value of investments can fall as well as rise and you may get back less than you invested.
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