Ethical investing - the basics

So you've got some money lying around and you're thinking about investing. The trouble is you're an ethical person who wants to make money, but not at the cost of the environment or the suffering of others. Well thanks to the internet, you can work out which companies, or groups of companies, you want to invest in, without too much effort. Here are some tips to keep in mind whilst searching businesses.

• Define what you’re looking for. Do you want to invest money to help the environment? To support fair trade or a fair wage for third world countries? Or do you want to support British-made products?
• Sort the wheat from the chaff. Get yourself familiar with the business and personal finance pages of some of the more serious papers (eg The Daily Telegraph, The Times, The Guardian and The Financial Times). There you can read more about the prospects for companies you are familiar with, such as high street brands, supermarkets and manufacturers. Remember, the main aim of your investment is to grow your savings, so don’t forget to consider the basics, like how strong is the company’s market? Does it have good management? Is it investing in new products or systems? An ethical business should still be run on good business principles.
• Type the name of any business you like into Google’s news search to see what’s been written about the company from a whole range of sources over the past few months. Pay particular attention to reputable sources, like Reuters and Bloomberg and the Wall Street Journal. Add words like ‘employees’, ‘energy’ and ‘environment’ to look for warning bells in the area that concerns you. Alternatively, use a business that screens companies for you, like Ethical Investment Research Services (EIRIS).
• Get familiar with companies involved in ethical enterprises, like organic grocers or alternative energy companies. But, be warned: these businesses come with no guarantee of being good for the environment. For example, the environmental charity Friends of the Earth says palm oil (one of the main ingredients for alternative oil makers) is one of the most significant causes of rainforest loss in Malaysia and Indonesia. They add that palm oil plantations destroy biodiversity and are associated with human rights violations and worker exploitation. Draw up a list of positives and negatives about each company, paying more attention to what other people say about the company than to what the company says about itself.
• Get in. Buying shares in a listed company allows you to sit in on the company’s annual general meetings and have your say about all company policy.

Ethical investment funds

If you want to take a more professional approach to investing ethically, consider investing your savings into an ethical fund run by fund managers. That means that someone else will do all the above for you.

A tracker is a type of fund that invests a little bit in a range of companies on the share market to “track” their progress.

The FTSE4Good is one example of a stock market index – an ethical one this time – which is often tracked.

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Melanie Feisst, Moneymagpie.com