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What is Ethical Investing?


What is Ethical Investing?

Ethical investment is known by a variety of terms including:
• ‘green investment’
• socially responsible investment (SRI) and
• sustainable finance.

All of these terms refer to financial or investment services which strive to maximise investment performance and social welfare.

In general, ethical investment looks to encourage corporate practices that promote environmental stewardship, consumer protection, human rights and diversity, although additional criteria such as the avoidance of weapons, alcohol, tobacco, gambling and pornography are often included as legitimate areas of concern. These criteria can be broadly summarised as environmental, social justice and corporate governance issues or ESG criteria.

In the UK in the last ten years, the number of clients who have chosen to invest ethically has increased significantly to 750,000 with approximately £11.3bn now invested in ethical
investments. We now know that 38% of the British public would invest ethically given the opportunity but many remain unaware that you can invest this way (Source: EIRiS 5.1.12).

Ethical investments typically monitor their impact on:
- environmental management and technology
- animal welfare
- human rights abuse
- armaments and
- other criteria such as:
- tobacco, pornography and alcohol production
- health
- education and
- gambling.


What are the benefits of ethical investing?

Ethical investment provides the opportunity to invest in ethically sound investment solutions that cater for a range of ethical preferences. It gives investors the option to avoid companies that engage in activities that they would not usually support, and proactively invest in companies that recognise their corporate responsibilities.

Investing ethically is now one of the fastest growing areas in financial services, for example, at the beginning of 2010 funds under management had grown to approximately $3.07 trillion
in the United States (Source: http://ussif.org).

What about performance?

Investing ethically doesn’t need to mean sacrificing performance. At worst, an ethical investment is uncorrelated with the market as it often excludes stocks such as oil, gas
and mining. These commodities can have an impact on the environment, and prices often follow global growth cycles.

As oil prices rise, ethical investments may underperform traditional portfolios, however they would equally outperform as prices fall, meaning the performance over the long term is similar to that of a traditional investment. Corporate governance issues can also be factored in which help investors to avoid massive shocks.


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He has given us sound advice and is happy to accommodate my husband and I's desire to invest ethically. He is a pleasure to deal with..Dr Alison Payne, Coventry

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Ethical investment is known by a variety of terms including: • ‘green investment’ • socially responsible investment (SRI) and • sustainable finance. All of these terms refer to financial or investment services which strive to maximise investment performance and social welfare. ...

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