The current crisis in Syria and several other African and Middle
Eastern countries has highlighted the difficulties in trading in areas of
political upheaval and instability. Investors are increasingly aware of the
impact their collective investment has on the economy of a region and whilst
individuals naturally wish to maximize their returns many do not want to make
gains from business activities which are exploitative or damaging. There are
many different investment strategies available
to investors but a growing awareness of world affairs and a realization that
many resources are finite and must be managed responsibly has led to an upturn in
interest in ethical investment.
What Is Ethical Investment?
Investors can tailor their approach to investment to tie in with
specific religious beliefs or political opinions. An investor may seek to avoid
making direct investments in companies that trade in arms or that are linked to
activities such as gambling or the consumption of alcohol. It used to be the
case that investments were largely made into funds which owned a wide array of
assets. Greater transparency is now a feature of the investment markets and
whilst it is possible to invest in funds which specifically state their
investment policies and welcome scrutiny, many investors choose to select their
own individual investment targets and can take control of their portfolio.
Companies have adapted their reporting in recent years and many now report in detail on their work to address requirements around corporate responsibility. Lower
trading costs make it easier for individuals to access ethical investments and
switch investments on the receipt of negative publicity surrounding a
particular company. Ethical investments used to be characterized by lower than
average returns but today ethical investments offer competitive returns which
are attractive to investors.
How To Seek Ethical Investment Opportunities
Investors may wish to put their money into companies that they
make a personal connection with or they may be content with putting funds into
a simple tracker that carefully selects its investments. One of the first
ethical investment opportunities was a product of the war in Vietnam when
a small group of Methodists sought opportunities to invest in companies that
offered no connection to the conflict. Many conservatives attacked an
investment scheme designed to enable investment which did not support companies
involved in the Vietnam war but the concept of responsible or ethical
investment was born. Financial websites usually contain a large
section for investors seeking ethical companies or products to put their money
into. According to Money.co.uk,
today there are opportunities to invest in companies that place the environment
at the forefront of their agenda, or others that avoid trading with companies
that exploit child labor and businesses that avoid trading in countries that
are run by corrupt regimes. It is also possible to invest in a simple savings
account held by a bank that is governed by ethical principles. Companies that
fail to act ethically run the risk of alienating potential investors who can
still enjoy strong returns by investing in alternative businesses or even
industries.
The Future For Ethical Investment
It is highly likely that the definition of an ethical investment
will evolve to incorporate many other considerations. An example may be the
level of remuneration for the CEO of a company. If the reward package in place
is disclosed at a level which makes investors uncomfortable the remuneration
policy for the company in question may need to be reviewed. It is not enough
for companies to deploy some basic strategies to achieve a status that
recognizes their commitment to socially responsible business activities as any
false claims will be easily exposed by investors. The next step in ethical
investment is already taking place as many companies host open days where they
can demonstrate their processes and talk to potential investors about the
company and how it takes social responsibility seriously. An increasing
awareness of the world around them means that more investors are seeking to put
their money into ethical financial products. There is a growing recognition
that strong returns can be generated by businesses that do take their role in
society seriously. The ability of companies to examine their own environmental
impact, social policies and governance is seen by many as a prerequisite for
the identification and management of risks and subsequent delivery of a
business plan that leads to high returns. The future for ethical investment is
bright as individuals realize that it is possible to achieve strong returns
whilst supporting companies that strive to make the world a better place.
