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With global warming now very much top of mind and regularly in the headlines is it any wonder more and more investors are taking a long hard look at the companies they choose to invest in? As a result, more investment money is heading in the direction of the “ethical” (eco-friendly) companies. But with everyone wanting to jump on the bandwagon and grab a share of the cash it’s hard to know who to trust. How can you tell if Company X really is ethical?
Is it really an “ethical” investment?
The first place to ask is probably the Ethical Investment Association (EIA). Formed in Australia in 1999, the association was established to assist people and organisations learn about how to become responsible investors and the value of contributing to sustainable companies. The EIA can assist you to find a broker or fund manager who meets the association’s standards for genuinely ethical investments. Other industry associations that may be of assistance include: the Association for Sustainable Responsible Investment in Asia, the Social Investment Forum and the UK Social Investment Forum. A leading industry publication is The Ethical Investor magazine which can also be a great source of information.
Ethical brokers, advisors and fund managers
This is a very niche sector but there are a number of finance funds and professionals to choose from. They include: Australian Ethical Investment, Hunter Hall, Ethical Investment Services. In addition, some of the more mainstream investment groups also offer ethical investments. They include: Tower, BT, Synergy, Perpetual, MLC and Col Sel. For an extensive rundown of current investment opportunities Cannex or Morning Star are a good place to start.
Different shades of green
Be aware, however, that all funds are different shades of green. Generally speaking funds use positive and negative screening when choosing companies to include in their portfolio. Negative screening, for example, might exclude companies that relate to (or derive income from) alcohol, casinos, tobacco, weapons and nuclear power. Positive screening is where a fund seeks out a company that runs a sustainable business, supports sustainability in others or employs ethical business practices (such as living wages in Third World countries).
You will need to do your homework to be sure that the money you are contributing is going towards activities you are aligned with. One example is BHP Billiton. This company features in a number of ethical investment funds, and yet it owns the Olympic Dam uranium mine. This may or may not concur with your own view of what an ethical investment is.
A number of charities and independent organisations also provide “banned” lists – outlining companies who do not, in their views, meet “ethical” standards. You may like to review these before you commit to a particular fund.
