Ethical investing is all a matter of opinion – and I'll put money on that

Investment View: Those who gamble would probably have no issues with bookies Ladbrokes or William Hill (I certainly don't)

There is no doubting the popularity of "ethical" investing, and why not? As Eiris, the ethical investment screening service (not for profit, naturally), points out, ethical products – fair trade, etc – have become increasingly popular with good reason. Why, then, should financial products be considered differently?

The catch is that once you get into the process, problems occur. Take the FTSE4Good index, which has been "designed to measure the performance of companies that meet globally recognised corporate responsibility standards, and to facilitate investment in those companies".

Decisions on whether a company gets in are based on Eiris research.

It is rather a shame that the names of those who are in aren't published on FTSE's website, but fortunately the index provided me with a list and there are one or two interesting companies on it. Take, for example, the oil giant Royal Dutch Shell. As I have said before in this column, I was hauled over the coals by a colleague for querying whether oil should be seen as an ethical investment. Her point was that the lights wouldn't be on without it.

Debates can actually be conducted about a wide range of companies in a wide range of sectors. Take Diageo (featured last week). Those who enjoy the odd tipple probably enjoy Diageo's products. It has so many famous drinks brands that they are actually rather hard to avoid. However, a Muslim might feel differently. So, for that matter, would many Christians. But it is still in FTSE4Good.

Those who gamble would probably have no issues with bookies such as Ladbrokes or William Hill (I certainly don't). Religious people might, though.

Some left-wing commentators and politicians (from the sillier parts of that side of the political spectrum) have also been puffing their chests out because bookies have allegedly been opening shops up in poor areas.

Actually, they've been opening all over the place thanks to the abolition of the "demand" test that used to allow existing betting shops to block rivals from opening new ones.

Lack of profitability will see a lot of those new shops closing over the next few years, but let's not let that get in the way of some good old tub thumping. Hills and Ladbrokes are both in.

Meanwhile, a broadcaster such as BSkyB (it's in) might find itself on certain people's blacklists for showing pornography (or material deemed to be pornographic). Oh, and then there's the small matter of one of its director's connection to the phone-hacking scandal.

Much actually depends on one's own personal prejudices. Which is why some "ethical" funds are classified as "light green" – perhaps using similar criteria to FTSE4Good – and some are "dark green": wind farms ok, but no to a wide range of companies including (probably) booze, gambling and of course, fags.

Yet the ever-controversial weed has some attractions as an investment right now. On the face of it the tobacco industry faces problems, particularly in the big Western economies: taxes keep getting higher and restrictions on where people can smoke keep getting tighter. What's more, the recession has hit volumes. Tobacco is addictive. But even those who are reluctant to give it up have cut back.

That said, when your customers are addicts they tend to stick. So when you've got your hooks into them, they're yours.

Then there are the emerging markets where the restrictions on what tobacco companies do tend to be less stringent and whose citizens are benefiting from rising incomes. Guess where some of those are being spent?

This backdrop means that the tobacco companies can offer reasonable growth prospects (Imperial Tobacco should turn in earnings per share growth of 9 per cent, British American Tobacco a bit more). They also produce solid dividends which are well covered by earnings.

Trading on about 12 times 2012 full-year earnings with a prospective yield of 4.2 per cent, Imperial Tobacco has been able to push through price rises to more than offset a fall in volumes. Its most recent update (at the end of last month) has provided confidence that it will meet full-year forecasts.

The shares have come off a bit recently, but tobacco companies tend to be resilient when markets get choppy.

Personally, I'd rather my money wasn't in these two, not so much because I object to tobacco but because pushing it hard in countries where regulation is light makes me a little uncomfortable. FTSE4Good shuns them too.

But if this doesn't bother you, Imperial Tobacco would be a solid hold.

British American Tobacco is nearly three times the size of Imperial. It trades on a heady multiple of nearly 15 times forecast full-year earnings, albeit with a slightly better forecast yield (4.4 per cent). The shares could come off a bit more before they would make sense as an investment. Avoid.

Start your day with The Independent, sign up for daily news emails
Voices
There will be a chance to bid for a rare example of the SAS Diary, collated by a former member of the regiment in the aftermath of World War II but only published – in a limited run of just 5,000 – in 2011
charity appealTime is running out to secure your favourite lot as our auction closes at 2pm tomorrow
Arts and Entertainment
James May, Jeremy Clarkson and Richard Hammond in the Top Gear Patagonia Special
tv
News
Claudia Winkleman and co-host Tess Daly at the Strictly Come Dancing final
people
Arts and Entertainment
Caroline Flack became the tenth winner of Strictly Come Dancing
tvReview: 'Absolutely phenomenal' Xtra Factor presenter wins Strictly Come Dancing final
PROMOTED VIDEO
Arts and Entertainment
The Apprentice finalists Mark Wright and Bianca Miller
tvBut who should win The Apprentice?
News
news
Extras
indybest
News
Elton John and David Furnish will marry on 21 December 2014
peopleSinger posts pictures of nuptials throughout the day
Sport
Brendan Rodgers looks on from the touchline
SPORT
Life and Style
A still from the 1939 film version of Margaret Mitchell's 'Gone with the Wind'
life
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
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.

iJobs Job Widget
iJobs Money & Business

Carlton Senior Appointments: Private Banking Manager - Intl Bank - Los Angeles

$200 - $350 per annum: Carlton Senior Appointments: Managing Producer – Office...

Carlton Senior Appointments: San Fran - Investment Advisor – Ind Advisory Firm

$125 - $225 per annum: Carlton Senior Appointments: San Fran - Investment Advi...

Sheridan Maine: Commercial Finance Manager

Up to £70,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Sheridan Maine: Regulatory Reporting Accountant

Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Day In a Page

The week Hollywood got scared and had to grow up a bit

The week Hollywood got scared and had to grow up a bit

Sony suffered a chorus of disapproval after it withdrew 'The Interview', but it's not too late for it to take a stand, says Joan Smith
From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?

Panto dames: before and after

From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?
Thirties murder mystery novel is surprise runaway Christmas hit

Thirties murder mystery novel is surprise runaway Christmas hit

Booksellers say readers are turning away from dark modern thrillers and back to the golden age of crime writing
Anne-Marie Huby: 'Charities deserve the best,' says founder of JustGiving

Anne-Marie Huby: 'Charities deserve the best'

Ten million of us have used the JustGiving website to donate to good causes. Its co-founder says that being dynamic is as important as being kind
The botanist who hunts for giant trees at Kew Gardens

The man who hunts giants

A Kew Gardens botanist has found 25 new large tree species - and he's sure there are more out there
The 12 ways of Christmas: Spare a thought for those who will be working to keep others safe during the festive season

The 12 ways of Christmas

We speak to a dozen people who will be working to keep others safe, happy and healthy over the holidays
Birdwatching men have a lot in common with their feathered friends, new study shows

The male exhibits strange behaviour

A new study shows that birdwatching men have a lot in common with their feathered friends...
Diaries of Evelyn Waugh, Virginia Woolf and Noël Coward reveal how they coped with the December blues

Famous diaries: Christmas week in history

Noël Coward parties into the night, Alan Clark bemoans the cost of servants, Evelyn Waugh ponders his drinking…
From noble to narky, the fall of the open letter

From noble to narky, the fall of the open letter

The great tradition of St Paul and Zola reached its nadir with a hungry worker's rant to Russell Brand, says DJ Taylor
A Christmas ghost story by Alison Moore: A prodigal daughter has a breakthrough

A Christmas ghost story by Alison Moore

The story was published earlier this month in 'Poor Souls' Light: Seven Curious Tales'
Marian Keyes: The author on her pre-approved Christmas, true love's parking implications and living in the moment

Marian Keyes

The author on her pre-approved Christmas, true love's parking implications and living in the moment
Bill Granger recipes: Our chef creates an Italian-inspired fish feast for Christmas Eve

Bill Granger's Christmas Eve fish feast

Bill's Italian friends introduced him to the Roman Catholic custom of a lavish fish supper on Christmas Eve. Here, he gives the tradition his own spin…
Liverpool vs Arsenal: Brendan Rodgers is fighting for his reputation

Rodgers fights for his reputation

Liverpool manager tries to stay on his feet despite waves of criticism
Amir Khan: 'The Taliban can threaten me but I must speak out... innocent kids, killed over nothing. It’s sick in the mind'

Amir Khan attacks the Taliban

'They can threaten me but I must speak out... innocent kids, killed over nothing. It’s sick in the mind'
Michael Calvin: Sepp Blatter is my man of the year in sport. Bring on 2015, quick

Michael Calvin's Last Word

Sepp Blatter is my man of the year in sport. Bring on 2015, quick