Ethical investments : introduction

The UK's first ethical unit trust was set up in 1984 and to date many billions of funds* have been invested in UK ethical funds by individuals and organisations wanting their investments to reflect their personal values. Individual investors have played a large part in the growth of the ethical investment market.

Ethical investment has been given a further boost by government regulation. Recently, charities have been required to state "Where material investments are held, the investment policy and objectives, including the extent to which social, ethical or environmental considerations are taken into account", which builds on similar requirements for pension funds.

As a result many large organisations have started to take social and environmental issues into account in the management of their investments. They include several local authority pension funds, the Universities' Superannuation Scheme, and company pension funds such as Sainsbury's, John Lewis and The Body Shop, as well as many charities and organisations such as WWF, Friends of the Earth, Amnesty International, Oxfam, the RSPB and the Soil Association. Charity assets invested with some form of ethical screening now total some £17 billion*.

While many investors welcome the opportunity to invest ethically, they still demand good financial performance. Here the evidence is encouraging. Studies show that investing ethically can contribute to good financial performance over the longer term. For example, the Domini 400 Social Index in the United States is an ethically screened index that provides an alternative to the Standard & Poors (S&P) 500 index. Over the ten years to the end of 2003, the Domini index outperformed the S&P by an average of 0.79% per year.**

* UK Social Investment Forum/Euro SIF; Socially Responsible Investing among European Institutional Investors, 2003 Report
** KLD Research & Analytics

Ethical Investments aim to integrate personal values with investment decisions. Many investors want their investment holdings to reflect how they would like to improve the World, and support companies that behave in ways they consider appropriate or responsible. Many people, like you, no longer accept that the financial bottom line is the only criterion for measuring success. Such investors look to a 'triple bottom line', believing that environmental, social and economic consequences should be considered as part of the investment assessment process. Investing ethically means knowing what your money is doing.