Socially Responsible Investment

Ethics and making money may seem like chalk and cheese. However, a growing number of investors are seeking out moral and environmentally aware companies in which to invest their money. Twenty years ago, environmentalists were lucky to get their views heard, never mind taken seriously but times are changing. Now they have the ear of governments and corporations all over the world as the rich and powerful wake up to the urgency of sustainable development.

Today, Socially Responsible Investment (SRI) is one of the fastest growing sectors in the financial community. Congestion, climate change, food scares, the manufacture of arms - these are just a few important issues. As a result, companies and individuals want their investments to make a positive contribution to the world, rather than be linked to the exploitation of people and the environment.

Profit with Principle

If you have any investment, from savings on deposit to a pension plan, it is inevitable that some of your money will be invested directly or indirectly on the stock market. Industry is at the heart of many of the world's most serious problems, from global warming and the destruction of the rain forests to child labour and poor working conditions. By choosing to invest ethically you can help to change the way companies operate and help to solve these problems.

You Cannot Hide!

Just how many of us have unknowingly supported companies involved in animal testing, child labour, the fur industry or pornography? As an investor, you benefit from the profit of companies and therefore must accept some responsibility for the actions that create those profits. By investing ethically, you can support those companies who make a positive contribution to society whilst encouraging improvement in those which are considered unethical.

The Importance of Saving

Most of us have long term goals in life. To reach them we need to put money aside. You may be saving for that dream holiday, for your children's school or university fees or for retirement. Whatever the reason, investing monthly spreads the risk and is a more comfortable way to build a nest egg. This can be from as little as £50 per month. Stakeholder pensions and saving schemes for children are also available within an ethical framework.

You may have a lump sum to invest from an inheritance, a windfall, a maturing policy or simply some spare cash languishing in a forgotten building society. These monies can be invested ethically and profitably.

Ethical Criteria

When taking an ethical stance in investment, we have to define which rules to follow. With some ethical funds, the rule is simply to avoid doing harm. These funds avoid investments in sectors such as tobacco, alcohol, armaments and animal testing. From an investment perspective, however, it is hard to see where the added value is in just avoiding certain companies. With this in mind, SRI investment goes beyond simple avoidance and implements a positive approach. This may be through a best of sector method, such as investing in the oil company that uses the most extensive environmental assessments amongst its peers. It may be through engagement policies, whether using shareholder influence to improve a company's practices or bringing external pressure by refusing to invest until changes are made.

Financial Performance - will investing ethically harm my wealth?

The aim of any investment is to increase your wealth and so the returns on your investment are important. Ethics is no longer a topic that shareholders can afford to ignore because the potential impact on a company's bottom line can be huge. Factors such as consumer boycotts, government legislation, the risk of legal action and the ability to attract, motivate and maintain quality staff all contribute to long term sustainability. Examples include lack of responsible accounting by companies such as Enron, recent protests and bad publicity for GAP clothing, protests against Esso and new Government tax breaks for alternative energy.

We believe that those companies who act responsibly and work to improve their operations will be well placed for the changes of the 21st century. Some Industries are growing rapidly, principally because they are associated with SRI. Examples of this include renewable energy (such as solar and wind power), water conservation, healthcare, advanced communications, innovations in technology and so on. In its broadest sense, the creation of procedures that support the environment and society can deliver high quality of life for all.

Who to choose?

The ever increasing range of ethical funds means that there is something suitable for every type of investor. Ultimately, it is you who decides what is ethical. A non smoker may not want to place their money in a fund that invests in tobacco companies and those concerned with animal welfare will wish to avoid companies that use animal testing. Please complete our questionnaire so we can help you pick an investment that suits your ethical profile.

Case Studies

• The F&C Stewardship fund achieved considerable success with the clothing and home textile company Peacocks, who have 300 stores in the UK. As a shareholder, they lobbied to improve labour standards and working conditions in the thousands of factories Peacocks sources around the world. They also had discussions with National Express, which resulted in the introduction of stringent exhaust emission targets.
  
• The Jupiter Ecology unit trust has great support for alternative energy, investing in companies such as Astro Power and Vesta Wind Systems.
  

How do I invest in an ethical fund?

An ethical ISA, unit trust, stakeholder and personal pension plan can be bought through our company at no extra cost. In fact, in most cases you will save money by dealing with us rather than going direct to the product provider. We offer an execution-only service. Execution only is when we provide the information; you make the choice - simple. Whatever your query, if you wish to discuss anything about ethical funds please do not hesitate to write to us, or call one of our staff on 020 7384 7300 or e-mail us at info@chelseafs.co.uk

Ethical Funds is a trading name of Chelsea Financial Services Plc.   Registered Office As Above.  Company no: 1728085

Remember! All investments carry some risk. Before going any further, please read the Important Notice below.