From being a niche backwater catering to a limited demand, ethical investment has now become mainstream and investment bonds now offer a wide variety of funds to choose from across many different sectors ranging from International equities, multi manager funds, UK equity funds (both growth and income), corporate bond funds and Asian equities. According to research from the Ethical Investment Research Service (EIRIS), as at September 2014, £12.2 billion was invested in ethical and environmental investment funds in the UK. This wide range of choice allows investors to build well diversified investment portfolios which match their ethical convictions with their attitude to investment risk. EIRIS revealed that 82% of consumers wanted financial product providers to take environmental, social and governance issues into account.
Within “Socially Responsible Investment” (SRI) there are a wide range of different criteria employed by the fund managers but they usually involve a screening process based on negative or positive criteria. Examples of negative criteria would include tobacco, alcohol, armaments, gambling, pornography and animal testing. The application of these criteria varies widely across the SRI sector and covers funds across the spectrum from “light green”, where only a few screening criteria are used, to “dark green” where a fund will only invest in companies actively engaged in sectors which have an environmental, humanitarian or wider social benefit.
Apart from screening, there are other strategies which ethical fund managers can use to ensure the stocks they invest in are acceptable to their investment principles. “Engagement” is where a fund manager will use their influence to change a corporate ethics in the companies which they invest in. Alternatively, “Best of Breed” means that within a sector which would normally be screened out negatively, some fund managers will select a company which has excelled in environmental, social and governance issues relative to its peers. Each fund manager will have their own ethical philosophy and strategy. Once you have decided which ethical funds you wish to invest in you then need to decide which investment bond provider to use who will allow you to access the funds. There is a wide variety of both internally and externally managed ethical funds available and we have produced tables showing ethical funds for onshore investment bonds and for offshore investment bonds to show you which investment bond providers offer access to ethical investment funds. If you want to see the charges for investing in ethical funds, you can request a free quote from us which will show you all the charges involved.
To find out more about ethical investment, you can view our Ethical Investment website. Other useful sites include the UK Sustainable Investment and Finance Association and the Ethical Investment Association.