Understanding ethical investment

The number of people choosing to combine profits with principles is rising, with investment in “green” funds expected to exceed £7bn for the first time this year.

Ten years ago just £1.5bn was put into environmental funds or those considered to be “socially responsible”, according to Ethical Investment Research Services (Eiris).

But growing concerns about global warming and carbon footprints is prompting investors to become increasingly ethically minded and eco-conscious.

Ethical funds typically invest their cash in socially responsible businesses, staying away from the arms trade or tobacco companies.

They may choose, for example, renewable energy companies or organic food producers.

Friends Provident pioneered ethical investing in 1984, and its Stewardship fund, which is now managed by F&C Asset Management, was the UK’s first ethical fund.

The ethical investment market has been booming in recent years, and there are now more than 90 “green” funds available to UK investors, with 10 new ones launched last year alone.

Making money with a clear conscience?

Contrary to popular belief, many ethical funds deliver impressive returns.

You need to know what your ethical priorities are and how green you want to go

Investors tend to believe they will not make as much profit by steering clear of certain unethical sectors, such as tobacco and arms.

Yet a recent survey by analyst Moneyfacts proves that you can make money by sticking to your principles.