Ethical Investing 

Guide to ethical investing

  • Understand how different generations are embracing ethical investing.
  • Learn whether there are more ethical investment products and how to invest via passives.
  • Comprehend what impact investing is and why it is popular.
CPD
Approx.60min
Guide to ethical investing

Introduction

Good Money Week each October is always a good time to assess the ethical investing space.

There has been plenty written about how ethical and sustainable funds outperform their non-ethical counterparts year after year.

As Amanda Young, head of responsible investing at Aberdeen Standard Investments points out, ethical investment is not new.

“The first corporation to seek investors, the Dutch East India Company, issued bonds and shares of stock to the general public in the early 1600s. 

“At the time, religious institutions boycotted the company over its involvement in the slave trade, but the boycott failed to achieve traction. This was because a small handful of wealth individuals owned the company,” Ms Young recalls.

She says: “Today, listed companies are held by the masses in their pension funds. 

“As ownership has grown, so have the concerns of those who wish to invest ethically. The first listed funds were launched around a quarter of a century ago, with ethical investors wanting to exclude certain sectors deemed unethical, such as gambling, tobacco and arms companies.”

Bryn Jones, manager of the Rathbone Ethical Bond fund acknowledges: “Over the last few years investors have looked at investing more ethically/sustainably for a number of reasons. 

“These include the realisation that you do not have to give up investment returns for a social return, and vice versa. 

“The younger generation also appears more socially and environmentally conscious, and some high profile frauds and governance issues have meant a screen becomes more important when considering sustainable, long-term returns.”

But there is still limited take-up of ethical investing.

Research by ethical bank Triodos reveals the UK socially responsible investing (SRI) market now accounts for £16bn in assets under management, yet two thirds, or 67 per cent, of investors have never been offered ethical or sustainable investment opportunities.

What is holding investors back from putting more money into impact, ethical or ESG funds?

Is there a gap in adviser knowledge, or do people feel it is too little to really make a difference?

This guide explores the importance of ethical investing across the generations to find out whether it really is millennials driving the trend.

It also looks at the range of ways to invest for those who have an ethical conscience and whether active wins out over passive ethical strategies.

Finally, the guide will look at the increased interest around impact investing and considers whether it is now mainstream.

Contributors to this guide: Adrie Heinsbroek, head of responsible investing at NN Investment Partners; Bonny Landers, head of sustainable, responsible and impact investing at Sandaire; Kathryn McDonald, head of sustainable investing at Rosenberg Equities; John David, head of Rathbone Greenbank Investments and Perry Rudd, head of ethical research at Rathbone Greenbank Investments; Bryn Jones, manager of the Rathbone Ethical Bond fund; Ryan Smith, head of ESG research at Kames Capital; Damian Payiatakis, director of the impact investing business at Barclays; Darius McDermott, managing director at Chelsea Financial Services; Amanda Young, head of responsible investment at Aberdeen Standard Investments; Andrew Parry, head of equities at Hermes Investment Management; Gary Waite is portfolio manager at Walker Crips; Matt Christensen, global head of responsible investment at Axa Investment Managers; Richard Eagling, head of pensions and investments at Moneyfacts.co.uk; Schroders Global Investor Study 2017; Moneyfacts; Standard Life Investments; Triodos.

eleanor.duncan@ft.com

In this guide

CPD
Approx.60min
  1. According to Mr David, which of these is not one of the three problems the younger generations will have to face in their lifetime?

  2. Moneyfacts says ethical funds have had the edge over non ethical funds in terms of performance. What is the average growth posted by ethical funds in the past year?

  3. Is this statement by Mr Osfield true or false? “Much has been made of some passives beginning to incorporate underlying ESG criteria in order to create ethically sound passive products, but we believe this approach is inherently flawed."

  4. What does Ms Young say about passive ethical money?

  5. Which one of these is not one of the characteristics of impact investing, according to Standard Life Investments?

  6. Mr Rudd says where social return takes precedence over financial return is know as what type of investing?

Nearly There…

You have successfully answered all the questions correctly, well done!

You should now know…

  • Understand how different generations are embracing ethical investing.
  • Learn whether there are more ethical investment products and how to invest via passives.
  • Comprehend what impact investing is and why it is popular.

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