1st September 2010

Ethical Investment: A Wolf In Sheeps Clothing?

IFA Letter of the week

It seems there are a lot of cynical people out there who are not convinced that ethical investments are the real deal. Not surprising really because the mistake often made is that ethical investment must be perfect - which of course it isn't!

The whole point of ethical investment is to offer investors the chance to not invest in areas that concern them or invest in areas in which they specifically wish to participate. These funds are therefore a closer match to their lifestyles or beliefs. Note that I say closer not an exact match.

An example would be tobacco companies. Most funds will invest in this sector because it is not only a good area for growth (and income - dividends tend to be good) but also can be a good defensive sector in time of economic downturn. The reasons are obvious - smokers struggle to quit and therefore even when they can't afford to smoke they do because it is a habit (as well as being a potential killer).

I personally hate tobacco companies with a passion so I will not wish to invest in these companies, whatever the potential profits. So what are my options? The answer of course is to invest in ethical funds that meet this criteria.

Most people have specific issues that concern them and these need, in my opinion, to be discussed when drawing up a financial plan. Do they want to invest their money with profit as the only goal or do they wish to align their money with their lifestyle or beliefs? Not everyone feels strongly enough but a growing number do and ethical funds can cater for their needs.

Author: Jeremy Newbegin IFA, The Ethical Partnership

Adviser Letter of the Week