Investing in Ethical Financial Products part 1
Nov
01
People just like you currently have around Pounds 4 billion invested in the ethical market in the UK. These investment funds operate on the principle of not investing money in any enterprise that would harm the environment, people around the world, or animals and wildlife — and some actively encourage progressive green companies. The idea is that the money you deposit with the institution is invested only in green firms.
Most financial institutions offer a few ethical or green investments, pensions, life insurance, and savings, and some also offer green mortgages, which are explained in ‘Borrowing for Green Homes‘. As demand for green and ethical products grows, more and more are becoming available.
These investments are called SRIs (Socially Responsible Investments) or Ethical Investments.
Pay attention to where the money you put into any investment fund goes and how it’s being used. For example, if you invest in an ethical unit trust, your money is pooled with that of other investors and used to buy shares in companies that have a good track record of looking after their employees and the environment. As in a standard unit trust, you make money as the values of the shares grow.
You can choose to invest in light green or dark green funds. The greener the fund, the stricter the rules governing what that fund can be invested in and the more green the companies invested in — for example, a fund where the only rule is that it won’t invest in firms involved in animal testing isn’t as green as one which won’t invest in firms involved in animal testing or companies that produce harmful pesticides.
The Ethical Investment Research Service (EIRIS) is a charity that provides independent research into the behaviour of thousands of different companies. You can check with it to see how green companies are before you decide whether or not you want your money invested in their operations.
Greening your pension
The most likely way for most people to invest is through their pension funds. Some of these have ethical policies and some don’t, but trustees for UK company pension funds have to tell you whether yours has such a policy and if so what it is. Ask for a copy of the Statement of Investment Principles relating to your fund and find out what the ethical, social, or environmental considerations are.
You can have an influence on how your pension fund invests your money and can transfer your pension contributions to one of the socially responsible funds.
If you don’t belong to a company pension scheme and are setting up your own stakeholder pension or personal pension plan, shop around for a fund that meets your ethical principles, but be warned that there aren’t as many to choose from as with regular pension funds. Try the big pension providers and take advice from an independent financial adviser who specialises in ethical investments.
Get good financial advice before making any decision about where to put your money.
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Investing in Ethical Financial Products part 1
- Investing in Ethical Financial Products part 2
- Investing in Ethical Financial Products part 3
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