So you think you're ethical?

Current Account: A new column on how today's issues affect your finances begins with a look at moral investments

IT IS laudable to feel distaste at French nuclear testing in the Pacific, to eschew French goods as a protest, or at least to feel a frisson of guilt while tucking into your favourite French cheese. But many people have not made the connection that through their investments, they may be supporting companies that assist in destroying some beautiful parts of the world.

At risk is anyone who invests in a fund that buys shares in European companies but where there are no controls on how that money is spent. Even investors in British companies may be funding suppliers of parts for deadly weapons.

The issue highlights the value of ethical funds which monitor their investments. Each fund has a distinct mission statement. This might include not investing in companies that experiment on animals or are involved with arms manufacture. The funds will also seek to back companies that aid the environment by, say, recycling waste.

Most of these funds employ outside research to assist them with their choice of company. They will also have a committee of reference to conduct further vetting.

The counter-argument to all this is that there is no such thing as ethical investment - that it makes no difference because even the cleanest-looking company may ultimately have some links to an "undesirable" business.

This is the reasoning that gives excuses to those who feel more comfortable ignoring these issues. It is condoning the attitude that some attempt and no attempt are equivalent. In reality, the better the support for ethical investment, the better educated investors are to the alternatives.

Does it make a difference? Consider this. A client of mine had inherited an investment portfolio including shares in Tomkins. This company has an odd combination of activities. It owns Hovis, the company of the cuddly adverts played to Dvorak's "New World" symphony. However, its unsavoury activity is supplying leg-irons for chain-gangs in the US. My client had no doubts about selling the stock.

My company got involved in recommending ethical funds eight years ago as a result of client interest. A guide* we produce, now in its sixth edition, rates the funds for their effectiveness in the screening process. Some score significantly better than others. The NPI Global Care Fund, for instance, enters into correspondence with the companies in which it has chosen either to invest or disinvest. In this way it is performing an educational role: the companies will know that unacceptable behaviour means no money.

So what might a positively ethical investment look like? For example, First Bus (previously Badgerline) works to improve public transport. There is encouragement to reduce air pollution from private cars by providing workable alternatives. First Bus is also experimenting with the use of natural gas to cut toxic emissions. FW Thorpe, meanwhile, has pioneered low-energy lighting. Again the motive is energy conservation.

There are dilemmas. Does one invest, for instance, in banks? They are not traditionally considered ethical because of their Third World debt, and because they seem willing to lend to companies irrespective of their activities. But many banks have good staff policies, in particular for women returning to work.

Such dilemmas demonstrate that stock-picking will depend on the views of the individual investor. Ethics are as personal as thumbprints; no two sets are the same and we just have to find the best fit.

And does it make a difference in the wider world? Yes, because lack of investment hits a company where it hurts most, the pocket. British Gas shareholders may not have made a direct difference - Cedric Brown still got his pay rise - but their indirect impact was enormous, subjecting top pay to a kind of scrutiny it had not suffered before.

Finally, does ethical investment make money for the investor? Statistics show that the average ethical fund over the past five years has outperformed the average fund that was not screened. So it is possible to profit with principles. Indeed, it might well be unethical for us to recommend funds that could harm our clients financially.

q Amanda Davidson is a partner at independent financial adviser Holden Meehan.

*'An Independent Guide to Ethical and Green Investment Funds' can be obtained free by phoning 0171-404 6442.

Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
Attenborough with the primates
tvWhy BBC producers didn't want to broadcast Sir David Attenborough's famed Rwandan encounter
News
Campbell: ‘Sometimes you have to be economical with the truth’
newsFormer spin doctor says MPs should study tactics of leading sports figures like José Mourinho
Sport
football
Life and Style
Agretti is often compared to its relative, samphire, though is closer in taste to spinach
food + drink
News
Kelly Osbourne will play a flight attendant in Sharknado 2
people
News
Down-to-earth: Winstone isn't one for considering his 'legacy'
people
News
The dress can be seen in different colours
i100
Sport
Wes Brown is sent-off
football
Voices
Lance Corporal Joshua Leakey VC
voicesBeware of imitations, but the words of the soldier awarded the Victoria Cross were the real thing, says DJ Taylor
Life and Style
Alexander McQueen's AW 2009/10 collection during Paris Fashion Week
fashionMeet the collaborators who helped create the late designer’s notorious spectacles
ebooks
ebooksA special investigation by Andy McSmith
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

SThree: HR Benefits Manager

£40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...

Recruitment Genius: Office Manager / Financial Services

£30000 - £37000 per annum: Recruitment Genius: Established in 1999, a highly r...

Jemma Gent: Year End Accountant

£250-£300 Day Rate: Jemma Gent: Are you a qualified accountant with strong exp...

Jemma Gent: Management Accountant

£230 - £260 Day Rate: Jemma Gent: Do you want to stamp your footprint in histo...

Day In a Page

War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

The battle for Mosul will unleash 'a million refugees'

Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn
Yvette Cooper: We can't lose the election. There's too much on the line

Yvette Cooper: We can't lose the election. There's too much on the line

The shadow Home Secretary on fighting radical Islam, protecting children, and why anyone in Labour who's thinking beyond May must 'sort themselves out'
A bad week for the Greens: Leader Natalie Bennett's 'car crash' radio interview is followed by Brighton council's failure to set a budget due to infighting

It's not easy being Green

After a bad week in which its leader had a public meltdown and its only city council couldn't agree on a budget vote, what next for the alternative party? It's over to Caroline Lucas to find out
Gorillas nearly missed: BBC producers didn't want to broadcast Sir David Attenborough's famed Rwandan encounter

Gorillas nearly missed

BBC producers didn't want to broadcast Sir David Attenborough's famed Rwandan encounter
Downton Abbey effect sees impoverished Italian nobles inspired to open their doors to paying guests for up to €650 a night

The Downton Abbey effect

Impoverished Italian nobles are opening their doors to paying guests, inspired by the TV drama
China's wild panda numbers have increased by 17% since 2003, new census reveals

China's wild panda numbers on the up

New census reveals 17% since 2003
Barbara Woodward: Britain's first female ambassador to China intends to forge strong links with the growing economic superpower

Our woman in Beijing builds a new relationship

Britain's first female ambassador to China intends to forge strong links with growing economic power
Courage is rare. True humility is even rarer. But the only British soldier to be awarded the Victoria Cross in Afghanistan has both

Courage is rare. True humility is even rarer

Beware of imitations, but the words of the soldier awarded the Victoria Cross were the real thing, says DJ Taylor
Alexander McQueen: The catwalk was a stage for the designer's astonishing and troubling vision

Alexander McQueen's astonishing vision

Ahead of a major retrospective, Alexander Fury talks to the collaborators who helped create the late designer's notorious spectacle
New BBC series savours half a century of food in Britain, from Vesta curries to nouvelle cuisine

Dinner through the decades

A new BBC series challenged Brandon Robshaw and his family to eat their way from the 1950s to the 1990s
Philippa Perry interview: The psychotherapist on McDonald's, fancy specs and meeting Grayson Perry on an evening course

Philippa Perry interview

The psychotherapist on McDonald's, fancy specs and meeting Grayson Perry on an evening course
Bill Granger recipes: Our chef recreates the exoticism of the Indonesian stir-fry

Bill Granger's Indonesian stir-fry recipes

Our chef was inspired by the south-east Asian cuisine he encountered as a teenager
Chelsea vs Tottenham: Harry Kane was at Wembley to see Spurs beat the Blues and win the Capital One Cup - now he's their great hope

Harry Kane interview

The striker was at Wembley to see Spurs beat the Blues and win the Capital One Cup - now he's their great hope
The Last Word: For the good of the game: why on earth don’t we leave Fifa?

Michael Calvin's Last Word

For the good of the game: why on earth don’t we leave Fifa?
HIV pill: Scientists hail discovery of 'game-changer' that cuts the risk of infection among gay men by 86%

Scientists hail daily pill that protects against HIV infection

Breakthrough in battle against global scourge – but will the NHS pay for it?