Posts Tagged ‘socially responsible’

While we watch BP spill oil into the Gulf of Mexico and we are being lured into the bookies with free bets perhaps now is a good time to discuss ethical investing.

Ethical, or socially responsible, investments refer to investments where the environmental, social, and ethical principles of the investors influence their investment decisions. Therefore an investor chooses based on the investment´s return and environmental impact, something which is becoming increasingly important nowadays.

An ethical fund is a way of pooling the money of hundreds of investors into a single fund. This is then invested in different companies that have been screened based on typical investment criteria and their social responsibility. This has become quite popular and there are now almost 100 UK-based ethical funds and it has become a global phenomenon.

So how does a fund select ethical companies? There are two principal ways, the most common, negative screening, involves avoiding companies that do not meet the fund´s ethical standards (i.e. invests in tobacco or arms). Or positive screening seeks to invest in those companies with a commitment to responsible business practices, products and/or services above and beyond their peers.

So now there is a way to invest with a conscious, maintaining your ethical standards while seeking a return on your savings. However, as always do your research and make sure the fund fits your investment criteria, including your green criteria before investing. Not all ethical funds have the same green criteria or return performance.

Finally, always remember another way to combine making a return on your money and social responsibility is to seek the best return for your risk appetite then donate to your own preferred social causes. So we don´t have to lose focus of the bigger picture when maximizing our money.