What is ethical investment?

One of the most exciting developments in the world of finance since the early 1980s has been the increasing use of non-financial factors as part of the investment decision-making process.

For the sake of simplicity, we call this ‘ethical’ investment and define it as “the application of both positive and negative ethical, social and environmental criteria in the management of investment portfolios”.

Ethical investment has further developed over this time and has also come to be referred to as ‘green’, ‘sustainable’ or ‘socially responsible’ investment (‘SRI’) as it has evolved to address a growing number of issues using a variety of investment styles.

In practical terms, while the application of these criteria can be segmented into specific concepts, we at Rathbone Greenbank favour an approach that allows individuals and organisations to apply their values across the whole of their investment portfolios.

Over the years, our team has remained at the forefront of ethical investment, helping to develop new approaches such as engagement, thematic investment and integration analysis to complement traditional positive and negative screening.

This means not just avoiding investment in companies that are of concern because of what they do or how they do it, or supporting those whose goods and services are considered beneficial, but also identifying core sustainable investment themes and engaging directly with companies and policymakers to effect change for the better.

Working together

With the increasing support of large investors such as church bodies, charities and pension funds, the ethical investment market has defied its sceptics and become a force for change.

From an estimated base of just £199 million in 1989, the amount invested in UK domiciled green and ethical retail funds in June 2015 was valued at over £15 billion1, while total funds (retail and institutional) invested in the UK under broader definitions of sustainable and responsible investment were put at €1.8 trillion at the end of 20132.

[1] Key facts & statistics, EIRIS http://www.eiris.org/media/statistics/
[2] European SRI Study 2014, Eurosif http://www.eurosif.org/our-work/research/sri/european-sri-study-2014/