When your investments are more than just money

For a significant number of investors, investing in shares and funds can feel like a dance with the devil as they have to compromise beliefs to achieve a return. With the growing awareness of the environmental impact of modern life, interest in ethical and environmental funds is increasing, and you can get a return on your investment without troubling your conscience.

Many people will avoid buying from certain companies, or will make ethical consumer choices, so it is only logical to extend this to how you invest your money.

These days, the funds that we previously described as ethical or ecological, all come under the umbrella term of Socially Responsible Investment (SRI) and there are myriad choices, so if you would like to invest without compromising your personal beliefs this could be of interest to you.

Socially responsible investment funds have been available for more than 30 years and this is a growing investment sector with the first fund launched in 1984, by UK insurer Friends Provident with its Stewardship Growth Fund. The fund had the radical strategy of excluding companies that did not meet its specified ethical standards, such as those involved in tobacco, gambling, pornography and the military, while also trying to invest in enterprises that made a positive contribution to society.

At the time, cynical traders in the City of London dubbed it the ‘Brazil fund’, because they thought anybody who invested in it must be nuts!

This fund still survives although it is now run by another company and has a different name but it was the precursor of what is now a significant investment sector. Whilst individuals have invested with an ethical bias earlier than the launch of investment funds, this was the start of retail investing in this way.

In the US, this market sector is known by the acronym ESG, for environmental, social and corporate governance. ESGs and SRIs are not the same as Sharia compliant investment funds but there are certain similarities.

Such funds usually screen out companies that invest in areas such as armaments, tobacco or alcohol, and others seek out companies that make a positive contribution to the environment.


Negative criteria

Initially funds were about excluding certain sectors and companies with the most commonly excluded companies being those involved in:

  • Armaments
  • Tobacco
  • Gambling
  • Alcohol
  • Pornography
  • Damage to the environment

Positive criteria

Conversely there are various positive traits and actions from companies that can lead to inclusion. These include:

  • Good board diversity
  • Positive environmental impact, locally and/or globally
  • Good consumer protection
  • Positive corporate governance
  • Recycling
  • Sustainable practices

Be aware however, that not all fund managers offer an ethical fund and many banks are linked to a single insurance company with limited investment options.

It is difficult to ascertain the actual size of this investment sector, as funds cross markets, but recent figures show that the SRI market in the UK alone was in excess of £16 billion, as of December 2016. This is separate to many offshore funds, and the large market in the US and elsewhere. It is growing exponentially, especially among the under 45s.

 Do they work?

A resounding yes.

Due to the reduced number of investment options, some funds can have a higher level of risk than the average retail fund, but the evidence shows that there are many well performing investment funds. There are funds that stand up well to the more mainstream funds and I will often select a SRI fund on performance alone.

Investing in line with your conscience does not have to mean compromising your beliefs and sacrificing investment returns. The options are there, even for those who want simply to include some of these funds in a portfolio. It is an area that is much overlooked in the offshore markets, so it is now time to give consumers in the UAE the option to invest in this way.

Investing in ethical and environmental funds is not about making sacrifices for your principles, but instead, is about enlightened self-interest.

I have been researching and advising on ethical investments for some 25 years so can assist not only with new investments, but also with rebalancing existing portfolios in line with your personal views. Not all advisers are familiar with such funds, and many don’t present it as an option, as it is an area of specialist knowledge.

For advice and assistance on the widest range of personal financial planning issues, to make an appointment, please contact me at keren@holbornassets.com and see other articles on this website for more useful information.

About FinancialUAE

A qualified and experienced Independent Financial Adviser based in Dubai, UAE. Professional and ethical. Freelance writer on personal financial issues & the On Your Side column in The National. Weekly co-host in Capital Radio UAE. Senior Partner at Holborn Assets LLC, Dubai, UAE.
This entry was posted in General financial information, Investment, Pension and tagged , , , , , , , , , , , , , , . Bookmark the permalink.

1 Response to When your investments are more than just money

  1. Pingback: 10 Steps for Smart Investing | Financial Planning in the UAE

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s