Ethical investing is a term we seem to be hearing about more and more over recent times. It is also known as ESG investing or Sustainable investing among others.
Many of my clients have been asking more questions about this over the past few years. To get an idea of the jump in popularity, last year investors put $20.6bn into US ethical investment funds compared with $5.5bn in 2018 (ft.com). But what does ethical investing actually mean? This is a difficult question as every company has a different definition of what ethical is. For some companies it could be as simple as not investing in gambling, tobacco or weaponry (negative screening). Whereas for other companies it is looking for investments that benefit society leading to longer term solutions to social issues (positive screening).
Many investors have shied away from investing ethically from fear they would see lower returns. However as awareness of climate change and social responsibility grows, so has the desire to reflect this in our investments.
According to an industry survey, nearly a third of investors said they wouldn’t continue to invest in a company that didn’t behave in a socially responsible way. Many large companies have woken up to this and in January one of the world’s biggest investment firms BlackRock announced they would be putting sustainability front and centre of their investment decisions.
During the past few particularly volatile months, two-thirds of sustainable funds have performed better than their Morningstar Category Average, a measure which covers the performance of all funds, sustainable and non-sustainable (Morningstar.co.uk). Teador Dilov fund analyst said “It would be a stretch to say that ethical funds have been resilient to the sharp downturns in the global market, but they have fared better.”
Here’s some good things companies are doing to combat social issues.
Neolight is creating a developed a Skylife phototherapy system with spectral power treatment to provide medical care for babies for jaundice. A frequent condition for newborn babies, The device includes the ability to adjust light intensity, ensures uniform light coverage, enabling parents to carry on the care for their babies once leaving the hospital.
Amadou have made a skin from amadou mushrooms. This is a boiodegradablem, lower environmental impact alternative to leather. A pilot collection of footwear and accessories have already successfully undergone viability, aesthetic and durability tests to ensure Amadou is suitable for use within the textile sector.
University of Colorado Boulder has been researching how to make building materials more green. Currently building materials accounts for 11% of the global C02 emissions. The university has been researching living materials such as cyanobacteria which actually takes in C02 particles to grow and used it to create a living brick. How cool is that.
Perkin Elmer created a diagnostic new-born screening process which enables to detect conditions which may not be evident in the new-born period. Many of these conditions have been known to have good outcomes when detected and diagnosed early on. This has prevented hundreds of thousands of instances of physical and mental disabilities and infant deaths, ultimately reducing child mortality.
For more information about investing ethically please get in touch.