Many of us hold investments – whether we realise it or not. Our pensions are a form of ethical investment, as are any investment funds or ISAs that we own.
The money we provide through our investments may be going to anything from coal-burning power stations to new wind farms. So making sure you choose an ethical option can be an important way to have a positive impact on the world.
What is ethical investing?
Investing involves providing funding to an organisation, business or project in the hope that you will get a small payment back each year or month.
Ethical investing involves choosing what to fund based on its environmental, social or other ethical criteria. There are two main approaches to this: either you can avoid the worst offenders (for example companies involved in arms or fossil fuels), or you can focus on funding more ethical alternatives (for example renewable energy projects, or community social housing).
This might sound complicated, but luckily there are lots of investment platforms and providers that will do it for you. These can include banks offering ethical ISAs and investment accounts, ethical pension providers, and specialist ethical investment platforms. The robustness of their ethical practices varies greatly, however, so it’s worth spending some time looking for options you can trust.
Ethical investing involves an element of risk. A good rule of thumb is that you should never invest more than you can afford to lose. However, pensions, stocks and shares ISAs and cash ISAs are guaranteed by the UK Financial Services Compensations Scheme, which may be able to compensate you if your bank or provider goes bust.
Is ethical investing important?
Our decisions about what to invest in helps determine the future. Projects and companies rely on investments to develop and grow. This means that your money could be building a wind or solar farm, but could also be funding a coal mine or oil field. Projects like these last 20 or 30 years into the future – so the decisions we make now will have lasting impacts.
Investing ethically is a chance to align your money and your values, as well as contributing to the ethical transition.