The Fair-trade, green and eco friendly movement has arrived into the mainstream in recent years, with an abundance of products now available for shoppers who want to shop ethically. Whilst many people would agree that the ethical provenance of a product is increasingly important to them – affirmed by the fact that ethical goods spending almost tripled from £13.5 billion to £36 billion in the decade from 1999 to 20091 – do investors think in the same way?
In 1984, the idea of ethical investment management was introduced and at first dismissed as a fad. But it has now grown to a market worth around £9 billion in the UK alone, and it shows no signs of slowing.
So what exactly is ethical investment management? In essence this is an investment approach which has many considerations other than simply the financial return potential of particular investments. An ethical portfolio might, for example, take special measures to avoid investing in alcohol, tobacco or arms dealing.
But it’s not always just about avoiding the bad investments. As esteemed environmental commentator Jonathon Porritt describes2, “It’s not just about negative screening – not investing in the bad things. We also have to concentrate on investing in the good things. I’m always anxious to invest in the companies that are creating a sustainable future, rather than simply not investing in those doing unsustainable things in the present. As such, climate change is a huge issue for me”.
For those new to ethical investments, investments in general, or who simply want to know more about the options available to them, the best advice is often to seek out an independent financial adviser. There is a vast body of research out there for would-be investors which can be overwhelming, but with sound advice the process can be made a little easier.
As for the returns and the future of ethical investing, Jonathon Porritt believes there is no limit to its growth. He states “I’m an optimist, so perhaps even in 10 years’ time it won’t be considered niche or ‘ethical’ any more – it will be the new mainstream” 3.