An ethical investments can offer investors:
- A socially responsible investment (SRI) approach to your portfolio, aiming to avoid companies that have a negative impact on the environment or on society
- Significant growth opportunities in companies which are likely to benefit from improvements and developments in areas like renewable energy
For most people investment funds offer the most accessible type of ethical investment. Some banks also have strong ethical practices for cash savings.
As ethical investment has become more popular, a greater range of investment options have become available, including equity funds designed to provide income or growth, and corporate bond funds. Funds may screen companies to identify firms with positive social or environmental practices or to identify companies engaged in negative practices that should be avoided. Funds may also invest thematically, such as investing in activities that reduce climate change.
The different approaches of ethical investment funds are often described as:
Light Green – avoiding stocks that have a negative impact on the environment and its people. For example, avoiding companies in the oil sector or those involved in arms, alcohol or animal testing.
Dark Green – investing in companies actively making a positive contribution to the environment and society, such as companies in the renewable energy sector.