If you want to invest your money in an ethical or sustainable way one of the biggest questions you’ll need to think about is whether you invest along ethical lines or are more interested in environmental issues. If it’s an ethical approach you favour that normally means some companies will be excluded from range of businesses you invest in, whereas other investment funds may put money into a wider range of companies but try and influence how they behave. There’s no right or wrong approach, it’s entirely down to you and how you feel.
What do you want from your money?
You may have a clear idea about what you want from your money or you may be taking the first steps into ethical investing. So, to help you focus your mind on what is important and where your priorities lie, here are some questions to consider. They’re taken from my book on green and ethical money Green Money; How to save and invest ethically.
1. Do you want to avoid companies that are active in areas such as:
– Production of weapons and armaments?
– Production and selling of alcohol?
– Animal testing?
– Nuclear power?
– Mining or exploiting the world’s resources?
SAVVY TIP: A number of ethical and responsible funds will exclude companies involved in mining, while others won’t.
2. How much of a difference does the way the product is used make to your decision about whether or not you’d invest? Would you invest if the company sold:
– Weapons and weapons equipment to the UK so it could defend itself against terrorists and aggressors?
– Weapons and weapons equipment to a Third World Country that was itself under attack from an aggressor?
– Weapons and weapons equipment to an oppressive or aggressive regime?
3. Continuing with the example of avoiding the arms industry; would you be happy to invest in companies as long as they don’t make products specifically for the military? What would you do about?
– A house building company that also constructs army barracks.
– A technology company that manufactures headphones. They are widely used within the broadcast and music industries, but are also used by the military.
– A cereal manufacturer that has a contract to supply breakfast cereals to the armed forces.
SAVVY TIP: Military contracts can be confidential, in which case a company may not even tell the investment fund whether its products end up in the hands of the military or not. If a company makes a product that’s not normally thought of as ‘military equipment’, such as safety equipment, headphones or nuts and bolts, it may not consider these to be part of a weapons or armaments system.
4. If you want to avoid companies involved in gambling; where would you draw the line? Would you exclude:
– All companies involved in promoting any kind of gambling. including the National Lottery operator (i.e. does a charitable element make a difference)?
– Companies where the main part of their business is gambling. You would be happy to invest in internet and mobile phone companies if they didn’t derive a significant part of their income from gambling.
– Companies that promote irresponsible gambling. You don’t mind people gambling as long as they aren’t getting into debt or addicted to it. If a company had a policy of promoting responsible gambling and hadn’t been found to flout any laws or guidelines, you would be happy to invest in it.
SAVVY TIP: If you want to avoid all companies with any link to gambling, not only would you have to exclude chains that own traditional gambling outlets, such as betting shops and bingo halls, but possibly mobile phone operators as well. Many ethical funds invest heavily in mobile phone companies so you could severely reduce the number of funds you could invest in if you want to avoid all companies with links to gambling.
5. What do you need to consider if you want to avoid companies with a poor environmental record? Could you ever invest in an oil company if environmental factors are important to you? Would you:
– Avoid all oil companies as they’re responsible for promoting our reliance on fossil fuels.
– Invest in those that have a better track record on environmental issues than other oil companies (i.e. those that have not been responsible for damaging oil spills or that have acted swiftly and responsibly when accidents have happened).
– Invest only in companies committed to exploring new forms of energy while reducing their own carbon footprint?
6. If you want to use your money to invest in companies that take climate change seriously and avoid those that do not, would you be happy if your money was in:
– A provider of nuclear power.
– A manufacturer of luxury performance cars even if they had a robust published policy on climate change.
– A low cost airline?
SAVVY TIP: Once you have an idea of what’s important to you, you can work out how and where you invest your money. There are a number of independent financial advisers who specialise in green and ethical investments. The ethical website yourethicalmoney has a searchable database of ethical financial advisers.
SavvyWoman email newsletters: If you found this information useful why not sign up now to receive free fortnightly email newsletters with money saving tips and help? You can sign up at the top of any page on the website and your details won’t be passed to any other company for marketing purposes.