When you make an ethical investment you know where your money is going. You make a choice to support companies which are inline with your social and environmental beliefs.
Tell me more…
Usually companies regarded as ‘ethical’ look to have a positive impact on society, treat employees fairly, and focus on sustainability and the environment.
How to invest?
You can invest through buying shares of ethical companies that you expect to do well in the future or you can lend money to these companies, aka buy their 'bonds’.
If you don’t have time to pick and choose different companies, you could invest in an ethical fund.
Gimme examples of ethical companies
A recent study launched a list of the world’s most ethical companies. The UK names making the list are: Marks & Spencer, National Grid and APTIV (a green technology company)
To buy shares in any of these companies, you will need either a Stocks & Shares ISA or a regular investment account. You can apply for and manage these accounts online.
What is an ethical fund?
It’s a goodie bag of different ethical investments. In one transaction you will be a shareholder or lender to many different companies. Your money is being spread around, aka diversified, which reduces any risk. Big red flag: You have to pay for this service, we have a guide for that.
Side note: Different funds have different ways to select ethical companies but at the very least they shouldn’t invest in arms or tobacco.
How to choose a fund?
You can search for ethical funds via your online broker. When you find a fund you should check the Fund Factsheet which will show you exactly where your money is going, the fund’s past performance and the ‘risk level’, as well as other things to help make a decision. We have a guide for that.
Gimme examples of ethical funds
Hargreaves Landsdown, the largest broker in the UK, have shared their favourite ethical funds. The top pick is Kames Ethical Equity Fund which is a way to invest in ethical UK companies. The fund’s annual performance on average over the last 5 years is +10.90% a year.
Want to invest but still feeling baffled? You could speak with a financial advisor. They would be happy to have an initial conversation for free and you can agree on a one-off payment so you are not tied into to yearly fees.