Profit from principle

David Hill INLT 45-099-PSB
David Hill INLT 45-099-PSB
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Last month saw the rebranding of National Ethical Investment Week to Good mMney Week. The aim is to raise awareness of sustainable, responsible and ethical (SRI) investing.

The aim of SRI investing is to allow you to have a positive impact on the environment and society through your investments without sacrificing performance. SRI investments are most commonly share-based and there are around 100 core investment funds to choose from.

Some funds have an environmental focus, which means they support themes such as green energy, clean water, waste disposal and green transport.

Other funds can be negatively screened or positively screened. Negatively screened funds avoid investment in specified activities, typically have a list of exclusions and they assess companies against a range of social, ethical or environmental criteria in order to decide whether or not a company is potentially acceptable as an investment. This reduces the number of companies a fund can invest in, with areas such as arms, tobacco and animal testing typically excluded.

Positively screened funds, on the other hand, invest in companies that are doing positive, beneficial and desirable things. Some fund managers also have a positive responsible engagement strategy where they invest significantly in companies and try to influence behaviour inside the company. Because of the variety of ethical beliefs and priorities, investments in these funds can sometimes mean compromise for investors and grey areas for fund managers.

One potential disadvantage of ethical funds is that they can be higher risk than mainstream equity funds and despite there being around 100 funds to choose from, this is a fraction of the market, with many thousands of funds being available on most wrap platforms used by independent financial advisers.

While we would encourage ethical investing, it is important to carry out your research and to seek appropriate specialist advice before investing.

David Hill is a Chartered Financial Planner and Independent Financial Adviser at Hills Financial Planning, 15 Agnew Street, Larne. He can be contacted on 028 28276814 or by email: david@hillsfinancialplanning.co.uk