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
Life and Style
Steve Shaw shows Kate how to get wet behind the ears and how to align her neck
healthSteven Shaw - the 'Buddha of Breaststroke' - applies Alexander Technique to the watery sport
Arts and Entertainment
The sight of a bucking bronco in the shape of a pink penis was too much for Hollywood actor and gay rights supporter Martin Sheen, prompting him to boycott a scene in the TV series Grace and Frankie
tv
Sport
footballShirt then goes on sale on Gumtree
Voices
Terry Sue-Patt as Benny in the BBC children’s soap ‘Grange Hill’
voicesGrace Dent on Grange Hill and Terry Sue-Patt
Arts and Entertainment
Performers drink tea at the Glastonbury festival in 2010
music
Arts and Entertainment
Twin Peaks stars Joan Chen, Michael Ontkean, Kyle Maclachlan and Piper Laurie
tvName confirmed for third series
Sport
Cameron Jerome
footballCanaries beat Boro to gain promotion to the Premier League
Arts and Entertainment
art
News
ebookA unique anthology of reporting and analysis of a crucial period of history
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

Guru Careers: Software Developer / C# Developer

£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

Neil Pavier: Management Accountant

£45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...

Sheridan Maine: Commercial Accountant

£45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...

Laura Norton: Project Accountant

£50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...

Day In a Page

Abuse - and the hell that came afterwards

Abuse - and the hell that follows

James Rhodes on the extraordinary legal battle to publish his memoir
Why we need a 'tranquility map' of England, according to campaigners

It's oh so quiet!

The case for a 'tranquility map' of England
'Timeless fashion': It may be a paradox, but the industry loves it

'Timeless fashion'

It may be a paradox, but the industry loves it
If the West needs a bridge to the 'moderates' inside Isis, maybe we could have done with Osama bin Laden staying alive after all

Could have done with Osama bin Laden staying alive?

Robert Fisk on the Fountainheads of World Evil in 2011 - and 2015
New exhibition celebrates the evolution of swimwear

Evolution of swimwear

From bathing dresses in the twenties to modern bikinis
Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

Sun, sex and an anthropological study

One academic’s summer of hell in Magaluf
From Shakespeare to Rising Damp... to Vicious

Frances de la Tour's 50-year triumph

'Rising Damp' brought De la Tour such recognition that she could be forgiven if she'd never been able to move on. But at 70, she continues to flourish - and to beguile
'That Whitsun, I was late getting away...'

Ian McMillan on the Whitsun Weddings

This weekend is Whitsun, and while the festival may no longer resonate, Larkin's best-loved poem, lives on - along with the train journey at the heart of it
Kathryn Williams explores the works and influences of Sylvia Plath in a new light

Songs from the bell jar

Kathryn Williams explores the works and influences of Sylvia Plath
How one man's day in high heels showed him that Cannes must change its 'no flats' policy

One man's day in high heels

...showed him that Cannes must change its 'flats' policy
Is a quiet crusade to reform executive pay bearing fruit?

Is a quiet crusade to reform executive pay bearing fruit?

Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
The King David Hotel gives precious work to Palestinians - unless peace talks are on

King David Hotel: Palestinians not included

The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
More people moving from Australia to New Zealand than in the other direction for first time in 24 years

End of the Aussie brain drain

More people moving from Australia to New Zealand than in the other direction for first time in 24 years
Meditation is touted as a cure for mental instability but can it actually be bad for you?

Can meditation be bad for you?

Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

Australia's first-ever Eurovision entrant

Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine