A reader asks: I want to find out about positive ethical investments in companies which are providing green products. Where can I find out about them?
Firstly, for more information on ethical investing you can read our guide to ethical investing by Jackson Wong or you can compare ESG investment opportunities.
But to answer the question, the number of ethical investment opportunities has surged in recent years as investors look for ways to use their money for good.
Despite this, it’s still very difficult to identify products that are truly green.
The London Stock Exchange doesn’t have an ethical sector, which means investors have to look at each company individually to decide which ones are making a positive impact.
There is no official ethical sector for funds either; instead, ethical funds span numerous different asset classes, countries and strategies.
Nevertheless, there are a few resources that aim to make the challenge of finding out about green investments slightly easier.
A good place to start is YourEthicalMoney.org – a site that lets you discover how and where your money is invested and search a database of more than 90 UK green and ethical funds.
If you’re interested in impact investments – investments that aim to generate a positive, measurable social and environmental impact – the Global Impact Investing Network (GIIN) is a useful resource. Its website explains what impact investing is, who is making impact investments and how they perform financially.
The GIIN also manages ImpactBase, a database of impact investment funds and products, although you need to complete an accredited investor questionnaire before you can use it.
It might be worth speaking to a financial adviser – in which case, the Ethical Investment Association’s website is the place to go. It lists advisers who are dedicated to the promotion of green and ethical investment.
An internet search will bring up a plethora of green products, but it’s wise to exercise caution. Many bonds promise eye-catching rates of return but they are high risk and aren’t protected by the Financial Services Compensation Scheme should things go wrong.
When it comes to comparing funds, the best buy lists provided by investment platforms can be helpful. These filter the large fund universe into a more manageable number.
“Some of these lists have an ethical section and hence can be a good starting point for ethical investors,”
says Laura Suter, personal finance analyst at AJ Bell.
Investment platform interactive investor has created a long list of more than 140 socially responsible and environmental funds, investment trusts and exchange-traded funds, which are broken down into three ‘ACE’ investment styles: avoids, considers and embraces. It has also published an ethical ACE 30 list of ‘best-in-class’ ethical funds.
As you do your research, it’s important to be aware of the so-called ‘greenwashing’ of funds as businesses try to cash in on the green pound.
“Until we have a set of rules or guidelines that determine when something can be badged as ethical, the onus is on investors to really dig into what the fund manager is doing to incorporate ESG into the portfolio selection, or whether they are just paying lip service to the idea,” says Suter.
The Investment Association is consulting on creating an approved ethical label for eligible funds, which will hopefully make identifying and comparing green investments a little easier in the future.