As consumers, we’re continuously faced with making lifestyle choices which reflect our personal values.
Walk into any supermarket and we have the choice of buying ethically sourced products. The information is out there, and relatively easy to access meaning we can tailor our consumer choices to our values.
Ethical investing is no different, as it allows you to focus on organisations that make a difference in the areas that are important to you.
Differences in Styles
In the early days, Ethical investing was largely about avoiding companies that were considered to be unacceptable, such as those involved in armaments or tobacco or those involved in the abuse of human rights and the environment.
Increasingly however, investors have realised that they have the potential to have a positive impact on the way in which companies operate, by using share ownership to engage with company management to improve the way they treat their employees, suppliers and the environment. It’s the latter, more positively focused approach, which is commonly referred to as Socially Responsible Investing (SRI).
Whilst this is great news for all of us, companies do not make these changes out the goodness of their hearts. A business that considers its impact on stakeholders can also reduce legal and regulatory costs and even improve a company’s brand. Products that offer sustainable solutions to issues such as climate change, can also prove incredibly valuable.
Making a choice that is right for you
There is nothing more personal than who we are and what we believe in. As we’re all different, it’s important to select and SRI or Ethical Investment option that suits your personal goals.
Your SWCO adviser will help you ascertain the portfolio which is best suited to your particular bias. Whether you are looking for a portfolio which screens out companies which you would wish to avoid, or a portfolio that invests in those companies which are having a positive impact.
Could it involve taking more Risk?
Ethical portfolios often have a lower weighting to sectors such as oil and gas or pharmaceuticals which means they behave differently compared to a traditional portfolio. The level of risk however, is primarily determined by your allocation to asset classes such as bonds, property and equities.
Adopting an SRI approach may actually help to reduce risk, as it can highlight opportunities or risks that you may not have otherwise have been considered.
Our recommended solutions have been designed to suit a range of investor profiles with a different tolerance for risk and in this way, you stand the best chance of your investments resulting in a successful outcome.
Does it affect investment performance?
There is no evidence of an SRI or ethical portfolio underperforming the market; a fact which is supported by a raft of academic literature on the subject. There’s also a growing body of evidence that shows that the adoption of a more sustainable approach to management, may actually improve your portfolio’s return. However this may not always be the case.
Do Ethical Portfolios cost more?
SRI and ethical funds typically have the same cost as any other Active fund, despite the additional layer of research involved. There are even some funds which are cheaper that the wider market as fund managers recognise the rapidly growing demand from consumers in this sector.
In Summary
No investment is perfect because companies themselves are complex multi-national entities. You will always be able to find at least one issue with any company in which you invest. By engaging with these companies however, you can guide management towards sustainable solutions to real issues such as poverty, global warming and animal cruelty. As the pressure increases from consumers, investors and the government, the pressure on companies to act responsibly is increasing every day.
THE VALUE OF INVESTMENTS AND THE INCOME FROM THEM MAY GO DOWN. YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED.
As consumers, we’re continuously faced with making lifestyle choices which reflect our personal values.
Walk into any supermarket and we have the choice of buying ethically sourced products. The information is out there, and relatively easy to access meaning we can tailor our consumer choices to our values.
Ethical investing is no different, as it allows you to focus on organisations that make a difference in the areas that are important to you.
Differences in Styles
In the early days, Ethical investing was largely about avoiding companies that were considered to be unacceptable, such as those involved in armaments or tobacco or those involved in the abuse of human rights and the environment.
Increasingly however, investors have realised that they have the potential to have a positive impact on the way in which companies operate, by using share ownership to engage with company management to improve the way they treat their employees, suppliers and the environment. It’s the latter, more positively focused approach, which is commonly referred to as Socially Responsible Investing (SRI).
Whilst this is great news for all of us, companies do not make these changes out the goodness of their hearts. A business that considers its impact on stakeholders can also reduce legal and regulatory costs and even improve a company’s brand. Products that offer sustainable solutions to issues such as climate change, can also prove incredibly valuable.
Making a choice that is right for you
There is nothing more personal than who we are and what we believe in. As we’re all different, it’s important to select and SRI or Ethical Investment option that suits your personal goals.
Your SWCO adviser will help you ascertain the portfolio which is best suited to your particular bias. Whether you are looking for a portfolio which screens out companies which you would wish to avoid, or a portfolio that invests in those companies which are having a positive impact.
Could it involve taking more Risk?
Ethical portfolios often have a lower weighting to sectors such as oil and gas or pharmaceuticals which means they behave differently compared to a traditional portfolio. The level of risk however, is primarily determined by your allocation to asset classes such as bonds, property and equities.
Adopting an SRI approach may actually help to reduce risk, as it can highlight opportunities or risks that you may not have otherwise have been considered.
Our recommended solutions have been designed to suit a range of investor profiles with a different tolerance for risk and in this way, you stand the best chance of your investments resulting in a successful outcome.
Does it affect investment performance?
There is no evidence of an SRI or ethical portfolio underperforming the market; a fact which is supported by a raft of academic literature on the subject. There’s also a growing body of evidence that shows that the adoption of a more sustainable approach to management, may actually improve your portfolio’s return. However this may not always be the case.
Do Ethical Portfolios cost more?
SRI and ethical funds typically have the same cost as any other Active fund, despite the additional layer of research involved. There are even some funds which are cheaper that the wider market as fund managers recognise the rapidly growing demand from consumers in this sector.
In Summary
No investment is perfect because companies themselves are complex multi-national entities. You will always be able to find at least one issue with any company in which you invest. By engaging with these companies however, you can guide management towards sustainable solutions to real issues such as poverty, global warming and animal cruelty. As the pressure increases from consumers, investors and the government, the pressure on companies to act responsibly is increasing every day.
THE VALUE OF INVESTMENTS AND THE INCOME FROM THEM MAY GO DOWN. YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED.
