Ethical investing is a financial trend which continues to increase in popularity. Despite its niche origins, it’s now viewed as a mainstream strategy for investing, especially with the rise in awareness of environmental and social issues.
As a strategy it’s clear that ethical investing is growing apace. Research from ethical bank Triodos in January 2021 found that almost 20 million of those living in the UK are already planning to be more ethical with their money. Added to this is pressure from policymakers. Governments around the world have increased their own focus on ethical investing, while information from non-governmental organisations (NGOs) and other members of civil society has also helped stimulate the market’s growth.
As a more developed investment strategy, ethical investing now offers much more flexibility and scope, which means it’s possible to choose a path which best suits you, your attitude to risk and your own values.
What is ethical investing?
Ethical investing can mean screening out investments which don’t fit with your personal beliefs or values or – more proactively – choosing investments which have a positive impact on the environment or society. By taking account of environmental, social and governance considerations you can ensure that your investments are intrinsically set up to produce more than just financial gain.
There are a range of ways to invest in this way; ultimately ethical investing is based on what matters to you, enabling you to avoid areas of investment you’re uncomfortable with, such as tobacco or arms. Issues most important to investors change over time and recently climate change, racial equality and fracking have been some of the areas which have seen more focus. In its simplest form ethical investing means choosing investments which have a positive impact.
A detailed explanation about ethical investing is available in our Insights section.
Understanding ethical investing
When considering an ethical investment strategy, it’s useful to understand how companies can be assessed, or rated, in terms of their ethics. Ultimately the number of issues a company takes into account, and its approach to these, will help determine whether it offers a good fit in terms of ethical investing.
Fund managers are an important part of this process and will take time to understand a company’s approach to its corporate social responsibility along with generic investment factors usually considered.
If you are planning to invest more ethically, it’s vital to take time to understand what your own key drivers are and what really matters to you so that you can build this into your own strategy.
History of ethical investing
Traditionally, ethical investing was very unusual. As a concept it originated in the early 1900s, driven by a number of religious organisations including the Quakers. The approach grew in popularity in the early 1980s, prompted in part by South African apartheid.
By 2000 UK law had caught up, dictating that pension funds had to take ethical criteria into account as part of their processes. In the last 20 years ethical investing has grown rapidly as a strategy, and saw a boom in 2020 prompted by the Covid pandemic. It’s also now generally accepted that there is a positive link between good ethical and social practice and company performance, again prompting more attention from investors in this area.
How to invest ethically
If you are keen to invest more ethically there are a range of different options available. It’s important to consider your own values and drivers and decide on what areas you’re comfortable with investing in, and which you want to avoid completely.
You should then work with a qualified financial adviser to create a strategy which echoes your ethical concerns. Once in place you’ll need to review and refine your strategy regularly, and in line with your values.
Ethical investing with The Fry Group in Dubai
Our highly trained team of advisers are well versed in ethical investing, and have worked with clients in this area for many years. A number of our advisers hold the CFA Certificate in ESG Investing – the first qualification of its kind in the UK, enabling them to integrate environmental, social and governance factors into the investment process.
Our ESG portfolios are designed to be financially motivated and driven by specific personal values. To discuss your own portfolio please contact your nearest office.
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