Hard Ethical Investment Is the Way of the Future

Is ethical investment a contradiction in terms or is it possible to put you money where your mouth is and to support projects that are working to make the world a better place?

There are many answers to this question, depending on how exactly you choose to play the game. If you want to keep your money in a high street bank which invests your money in arms companies selling weapons to repressive regimes and which also takes care to mention sustainability and ethics in its annual report, then you currently have many options to do so, almost all the banks do this. Or you could put your money into a bank with stronger ethical criteria such as (in the UK) the Cooperative or Triodos.

Funds

As for investment funds, the majority out there do not have any ethical requirements whatsoever. Some make a lackadaisical attempt at having ethics by doing what is called negative screening. This involves a quick assessment to see if the fund is directly investing in things like alcohol and tobacco, weapons, nuclear energy, fossil fuels, gambling, human rights abuses, predatory lending, pornography, and so on.

You might notice the preponderance of an old Christian morality here. For me personally, I don't care so much about investing in alcohol manufacture. For example, I drink beer myself and generally I am in approval of legal drug sales. Yet this is a divisive issue and everyone has their own opinion.

Regarding tobacco, I feel differently, I think it is a nasty drug and do not want my money supporting its distribution. With the expected legalisation of marijuana I will be in a quandry. I see it as a great investment opportunity yet fully anticipate most of the new opportunities being arranged by Big Tobacco—which will no doubt have a stranglehold on the market.

Triodos

In contrast to the traditional funds, what Triodos Bank do with their funds (such as their Innovative Finance ISA and their Sustainable Equity Fund) is to first make a positive screening and then do the negative screening. This makes so much more sense to me. Triodos only invest in certain things: health, renewable resources, sustainable food production, social inclusion, sustainable innovations and sustainable mobility.

They then do the standard negative screening on top of this to squeeze out any undesirables which have slipped through (perhaps a health care company which also invests in the arms trade in true Milo Minderbinder fashion—I joke but I have no doubt that I would be able to find such a thing very quickly if I wanted to).

It's the positive screening that does the real work and I find it astounding that most funds do not do it, even when they claim to be ethical (see below for examples).

As a side note, Triodos and all other serious fund managers also carry out continuous assessments to check if matters change. Everything is also very open and transparent on their website, another massive plus.

Hard Ethical Investment

I call this approach hard ethical investment, that is to say where "ethical" actually means ethical. This is where I want my money to be. Triodos are nowadays a big player and can be trusted (although I am not a legal advisor and what you do with your money is always at your own risk). I have gone into detail on them to show that there are alternatives to the standard unethical fund. It is good to have a name you can trust, since there is a lot of bullshit out there. Let's take a quick look at some funds which might at first glance appear ethical.

Womens Empowerment?

The AXA WF Framlington Women Empowerment Fund sounds good. Who (apart from a traditional investor) doesn't want empowerment for women? Unfortunately though, the devil is in the details. The fund's top five holdings are Bank of America, Facebook, Microsoft, Nike and VISA. Why would these companies be supporting womens rights? Well, the answer is that to be considered for this fund, a company must have a board which is made up of 20 percent or more by women.

What a joke! 50 percent would seem a much better requirement to me. When we then read on to find out that signatories to the United Nations Women's Empowerment principles are automatically welcomed into the fund, it is clear that this fund operates on the level of buzzwords alone. AXA must think they can capitalise on the current interest in ethical investment without changing their stripes. This is why we need to talk about hard ethical investment.

Responsible Investment?

Let's try another fund, Jupiter Responsible Income. Responsible sounds good but again, it's nothing at all like a hard ethical fund. Their top five are Aviva insurance, Glaxosmithkline Pharmaceuticals, Lloyds Bank, Tesco and HSBC bank. The two banks have no qualms about investing in repressive regimes and arms dealers, that is well documented.

Glaxo test on animals and famously denied poor Africans access to anti-retroviral drugs in the 1990s until it was threatened with being fined.

Tesco are of course the supermarket most responsible for the demise of the British high street. We now do not have local butchers and greengrocers, they have all been driven out of business by the “super” market.

The only one which seems to be attempting to do better is Aviva and whilst that is to their credit, it's by the responsibility of this fund has nothing to do with hard ethical investment.

Good Luck

I hope this short piece has shown the benefits of looking into your investment funds beyond the buzzwords and seeing where they actually invest your money.

Stay strong in your search for hard ethical options. Good luck!