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Like life, one size does not fit all. The saying ‘each to his/her own’ applies just as much to the concept of ethical investing.
Experiences, lifestyles and convictions all help give depth to our own expectations. Likewise investment options that prioritise benefits other than the truly financial ones can contain some inherent compromise. This is almost a requirement given the need to manage risk to investment capital.
Common Styles
The basic and common styles used by both individuals and fund managers can be summarised as follows:
1. Negative Screening, where certain investments or classes are avoided – “Exclude the Bad”
2. Positive Screening, where certain investments are sought out - “Reward The Good”
3. Best-of-Sector, selects leading firms based on pre-determined criteria
4. Corporate Engagement, where shareholders actively undertake to change the company’s performance – “Convert Sinners to Saints”
5. Active investment that assists small business and enterprises (may include community schools and resources).
Investing ethically need not strictly be via the share market or commercial funds.
As in traditional investing, it is important to look into the underlying managers’ investment strategy/ies to ensure that you are comfortable with how your money is invested, not all managers have the same idea of what constitutes ethical investment.
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