Ethical and Socially Responsible Investing
Ethical investing starts with your ideas and principles – what you believe to be important. Views vary from person to person, as does the approach of most ‘ethical’ funds. Some funds have very strict criteria and will screen out companies that do not meet these, whereas other funds have less strict criteria and may select the best company from a group, even if it does not meet all of the set criteria.
Some funds are labelled as Socially Responsible Investments, some Ethical, some Sustainable and some Climate Change.
These screens have led to the perception that many ethical funds can underperform as they do not tend to include larger companies in industries such as tobacco, pharmaceuticals and mining (which have historically delivered strong performances).
While there is a narrower stock universe than their unconstrained counterparts, there is no evidence that following your conscience will lead to poor returns on your investment.
Some funds apply screens to avoid investing in unethical areas. The strictness of these screens can vary. For example, a fund that avoids tobacco will avoid investing in tobacco companies but may invest in companies where tobacco products are sold. A fund with a strict view will avoid investing, but a fund with a more balanced approach may invest as it is not a core business area.
Your Sterling & Law financial adviser will discuss your ideas and principles with you to help you find the
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