How Are Ethical Investment Decisions Made?

THERE ARE more than 30 ethical unit and investment trusts on the market and the number is growing, each with a slightly different set of parameters on how they allocate funds.

They base their investment strategies on both positive and negative criteria. Positive means actively searching out companies which do something considered "good", such as supplying the necessities of life - bread, water and clothing. Negative means avoiding companies involved in "bad" activities, such as gambling or the arms trade.

For those who want an ethical investment, the first step is to decide what issues are important to you, then choose a fund which best approximates your values. The problem here is that the commitment of companies towards some social goal can vary, not only in whether or not they support a particular policy, but the degree to which they do so.

For example, the TSB Environmental Investor Fund is a "green fund" and, among many other considerations, will back companies which achieve a reduction in fuel bills by energy conservation. Yet the TSB fund will only avoid investing in UK companies which have contracts with the Ministry of Defence of more than pounds 250m over three years. By contrast, Friends Provident's Stewardship trust has a pounds 5m limit over three years on MoD contracts.

Ethical investors often assume they will have to accept a lower return as the price of listening to their conscience. In fact, ethical trusts have slightly out-performed the UK sector as a whole, over both the past one year and the past five years. A sum of pounds 1,000 invested in the average ethical trust five years ago would now be worth pounds 1,464, against just pounds 1,409 for the average UK unit trust.

All equity unit trusts have been hit by stockmarket falls in the last few weeks, but ethical funds have suffered less than most. The one-year returns for a pounds 1,000 investment are pounds 986 for the average ethical trusts and pounds 949 for the average UK trusts.

Have you tried new the Independent Digital Edition apps?
Life and Style
ebookNow available in paperback
ebooks
ebookPart of The Independent’s new eBook series The Great Composers
News
people
News
A boy holds a chick during the Russian National Agricultural Exhibition Golden Autumn 2014 in Moscow on October 9, 2014.
news
Life and Style
love + sex
Sport
Ashley Young celebrates the winner for Manchester United against Newcastle
footballNewcastle v United 1 player ratings
Arts and Entertainment
Victoria Wood, Kayvan Novak, Alexa Chung, Chris Moyles
tvReview: No soggy bottoms, but plenty of other baking disasters on The Great Comic Relief Bake Off
Sport
Ashley Young celebrates the winner for Manchester United against Newcastle
footballNewcastle 0 Man United 1: Last minute strike seals precious victory
Life and Style
Tikka Masala has been overtaken by Jalfrezi as the nation's most popular curry
food + drink
Arts and Entertainment
Seth Rogan is one of America’s most famous pot smokers
filmAmy Pascal resigned after her personal emails were leaked following a cyber-attack sparked by the actor's film The Interview
News
Benjamin Netanyahu and his cartoon bomb – the Israeli PM shows his ‘evidence’
people
Arts and Entertainment
80s trailblazer: comedian Tracey Ullman
tv
News
i100
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs General

    Recruitment Genius: 2nd / 3rd Line IT Support Engineer - Managed Services Provider

    £30000 - £37000 per annum: Recruitment Genius: A 2nd / 3rd Line IT Support Eng...

    Recruitment Genius: UI / UX Designer

    £25000 - £35000 per annum: Recruitment Genius: This firm are focussed on assis...

    Recruitment Genius: General Processor

    £7 per hour: Recruitment Genius: A vacancy has arisen for a General Processor ...

    Recruitment Genius: Outbound Sales Executive - B2B

    £18000 - £22000 per annum: Recruitment Genius: A great opportunity has arisen ...

    Day In a Page

    War with Isis: Iraq's government fights to win back Tikrit from militants - but then what?

    Baghdad fights to win back Tikrit from Isis – but then what?

    Patrick Cockburn reports from Kirkuk on a conflict which sectarianism has made intractable
    Living with Alzheimer's: What is it really like to be diagnosed with early-onset dementia?

    What is it like to live with Alzheimer's?

    Depicting early-onset Alzheimer's, the film 'Still Alice' had a profound effect on Joy Watson, who lives with the illness. She tells Kate Hilpern how she's coped with the diagnosis
    The Internet of Things: Meet the British salesman who gave real-world items a virtual life

    Setting in motion the Internet of Things

    British salesman Kevin Ashton gave real-world items a virtual life
    Election 2015: Latest polling reveals Tories and Labour on course to win the same number of seats - with the SNP holding the balance of power

    Election 2015: A dead heat between Mr Bean and Dick Dastardly!

    Lord Ashcroft reveals latest polling – and which character voters associate with each leader
    Audiences queue up for 'true stories told live' as cult competition The Moth goes global

    Cult competition The Moth goes global

    The non-profit 'slam storytelling' competition was founded in 1997 by the novelist George Dawes Green and has seen Malcolm Gladwell, Salman Rushdie and Molly Ringwald all take their turn at the mic
    Pakistani women come out fighting: A hard-hitting play focuses on female Muslim boxers

    Pakistani women come out fighting

    Hard-hitting new play 'No Guts, No Heart, No Glory' focuses on female Muslim boxers
    Leonora Carrington transcended her stolid background to become an avant garde star

    Surreal deal: Leonora Carrington

    The artist transcended her stolid background to become an avant garde star
    LGBT History Month: Pupils discuss topics from Sappho to same-sex marriage

    Education: LGBT History Month

    Pupils have been discussing topics from Sappho to same-sex marriage
    11 best gel eyeliners

    Go bold this season: 11 best gel eyeliners

    Use an ink pot eyeliner to go bold on the eyes with this season's feline flicked winged liner
    Cricket World Cup 2015: Tournament runs riot to make the event more hit than miss...

    Cricket World Cup runs riot to make the event more hit than miss...

    The tournament has reached its halfway mark and scores of 300 and amazing catches abound. One thing never changes, though – everyone loves beating England
    Katarina Johnson-Thompson: Heptathlete ready to jump at first major title

    Katarina Johnson-Thompson: Ready to jump at first major title

    After her 2014 was ruined by injury, 21-year-old Briton is leading pentathlete going into this week’s European Indoors. Now she intends to turn form into gold
    Syrian conflict is the world's first 'climate change war', say scientists, but it won't be the last one

    Climate change key in Syrian conflict

    And it will trigger more war in future
    How I outwitted the Gestapo

    How I outwitted the Gestapo

    My life as a Jew in wartime Berlin
    The nation's favourite animal revealed

    The nation's favourite animal revealed

    Women like cuddly creatures whilst men like creepy-crawlies
    Is this the way to get young people to vote?

    Getting young people to vote

    From #VOTESELFISH to Bite the Ballot