Socially responsible investment (SRI) allows people to align their personal beliefs regarding environmental, social and ethical concerns with their financial objectives. And through positive results and changing attitudes, it appears to be breaking into the mainstream.
James Howard, director at Emerald Knight, the ethical investment specialist, provides 10 good reasons to get involved.
1. You can avoid the negatives
SRI can ensure that your money isn’t supporting companies that engage in activities you might disapprove of, such as animal testing, deforestation, arms manufacture, or nuclear energy.
2. You can support the positives
You can actively choose to support companies or projects which have positive social and environmental policies in place, such as renewable energy, carbon offsetting, sustainable timber, or poverty reduction.
3. You don’t have to sacrifice profits for principles
In many cases, ethical investments or funds have produced above-average returns, even allowing for the cost of extra screening, and many of them have outperformed more mainstream investments. For example, the Ecclesiastical Amity International Fund recently won the prestigious Lipper award for best global fund over five years and has outperformed the global sector by 82.06% over the 10 years to March 2013.
4. You know how your money is being invested
This may sound obvious but many people don’t know, or are just not interested in what happens to their money once they’ve found a home for it. Going down the SRI route allows you to choose exactly how your cash is being invested and what difference it’s making.
5. It makes sense
Longer-term solutions are needed for environmental concerns such as global warming and pollution, and investments supporting these tend to hold firm in times of volatility. Companies or projects which are focusing on, and achieving good results with such issues, are therefore well worth considering.
6. It’s a growing trend
According to recent figures from EIRIS, the sustainable investment research firm, there’s around £11 billion invested in Britain’s green and ethical funds, up from £4 billion 10 years ago, and from £6.8 billion in 2008, when the financial crisis began. And over the last decade, the number of ethical investors has tripled, from 250,000 to 750,000.
7. There’s plenty of choice
You can choose to invest directly into companies which meet ethical criteria, invest in specific projects over the short, medium or long-term, or look at ethical funds which can be growth or income generated.
8. Green issues can be winners
Global warming, an ageing population, and resource scarcity are just some of the issues the world is facing right now. According to the UK Sustainable Investment and Finance Association (UKSIF), companies that are managing environmental, social and governance issues well could be the star performers of the future.
9. You can make money and make a difference
Your investment could help to create a gradual shift towards better corporate social responsibility, and ultimately shape the future of the planet and its people.
10. You can use your SIPP
Many ethical investments and projects are SIPP (Self-Invested Personal Pension) approved, which allows a greater degree of flexibility for people who want to use their private pension to invest in different asset classes.
James Howard is director at Emerald Knight.