What is Ethical Investing?

In this month’s blog we’re examining ethical investing.

What exactly is it, how is it done, and what could it mean for YOUR long-term financial goals? I examine the bigger, ethical picture from an investor’s point of view.

Here at Delaunay, we’re always mindful of what’s going on in the world.

As a Financial Planning consultant, the actions of the great and the good (and maybe the not so great, depending on your point of view), can and do affect the volatility of markets directly, and thus the performance of our clients’ investment portfolios.

So, we keep up to speed with developments on a daily basis.

A Pressing Issue

Sometimes worldwide events focus our attention on even bigger things. On our own lives, and how we can make things better, not just for our families in the here and now, but also for the generations coming up after us.

For the entire planet, no less.

None more so than in the last couple of weeks, as daily reporting from the Conference of the Parties 26 (or more simply referred to as COP26), has shone a light on the very real dangers posed by climate change. And, on how fast the clock is counting down to midnight.

At the time of writing, an agreement of sorts appears to have been reached. But, as is always the case when governments of the world are involved, matters can be complicated. We will have to wait and see. (And, keep on putting out our recycling.)

Although this isn’t by any means a political piece, recent discussions at COP26 in Glasgow have prompted me to think about closer-to-home scenarios relating to investments. Specifically, your investments and how may you feel socially and morally about where Delaunay places your money according to your ethical stance. After all, your standards shape you as a person so it’s important to raise this early on.

Moving forwards into 2022, you’re likely to be hearing more from us about ethical investing – it’s here to stay.

What Exactly IS Ethical Investing?

Firstly, it’s a huge subject, and one that’s almost impossible to cover in a single blog. No doubt we’ll come back to it again. Also referred to as Socially Responsible Investing (SRI) and Environmental, Social and Governance Investing (ESG), ethical investing is by no means new, and as we’ve touched on, certainly not a flash in the pan.?

In my opinion, it’s about sustainable, socially conscious, and/or “green” investing. In other words, investment strategies that seek to consider both a financial return and the greater good – whatever that means to you. To expand a little, as an ethical investor you may prefer investments that actively promote robust environmental guardianship, consumer protection, human rights, and social equality. Or equally, those that do no harm to these things.

Just a nuanced, expanded distinction with regard to definitions here: Where ethical investing tends negatively to screen investments based on moral principles, ESG emphasises positive screening. That is, the latter encourages positive investment in something that’s “good”, the former – avoidance of, well – “bad”, if you catch my drift.?

A Little History

Many believe that it’s been with us for centuries, with the Quakers and Methodists making moral choices about where they invested their funds. A more contemporary instance was the proposal put together by one Charles Jacob in the early 1970s for the very first ethical trust, eventually granted permission by the Department of Trade a few years later.

Previously ring-fenced almost exclusive by the thorny issues of weapons/arms and tobacco, ethical investing for the 21st Century is a many-sided prism. For example, it now includes gender equality, nuclear power, human rights, animal welfare, and many others.

What’s more, performance, formally an ethical financial compromise (lower returns in exchange for a moral conscience) now generally delivers on equal terms with other “standard” investment strategies. Why? Because where SRI ventures were very much in the minority, there are now over 2,500 funds in the UK and anecdotally, many of them are outperforming the more traditional approach.

Increasingly, therefore, ethical investing will be on the agenda. And, on ours, too.

The Benefits of Ethical Investing

The pluses are obvious, perhaps: good organisations receive a financial boost; those with a negative impact are encouraged to review their operations. Only investing in companies that avoid single use plastic, for example, sets a precedent that other enterprises may wish to follow to attract the funds they need for growth.

And of course, you, as an investor could reap the rewards.

But.

In my view, having worked in this ever-changing sector for some time now, there’s one question I always think about:

How Green is Green?

Investing into an enterprise that ticks all the necessary green and socially responsible boxes looks like a solid decision. And of course, for many it is.

Nevertheless, we need to look under the bonnet. Do their employees smoke? Are they paying their cleaners a living wage? Or a minimum one? Indeed, is the agency to which they’ve contracted this essential service equally, like Caesar’s wife – above suspicion? Their other suppliers, also. And where exactly do we stop?

Here at Delaunay, we have a number of tools with which to attempt to identify an ethical business, but no doubt this is a discussion that needs to continue.

Our Approach

Our role is straightforward, in theory: to put your funds into the right investments purely from a risk point of view, considering:

·????????Your attitude to risk

·????????Your knowledge, understanding and experience of investment

·????????Your capacity for loss, and how a worst-case scenario – ie, losing all or most of your money - will sit with you.

As an independent financial advisor, I aim to offer well informed and impartial advice to help you invest your money into the right solutions first and foremost; those that are most likely to support and deliver your life goals. We’re not here to pass judgement, nor to offer ethical counsel.

Your decision is the casting vote here.

Nevertheless, we will be having that conversation.

We want to know your opinions, thoughts and feelings about investing in a way that’s honest and decent – for you. Doing the right thing, you could say. An engagement with Delaunay will need your decisions on the following:

·????????Community involvement and equal opportunities

·????????Positive environmental services and initiatives

·????????Social enterprise

·????????Recycling, waste and water management

·????????Overseas development

·????????Animal welfare

·????????Alcohol

·????????Environment

·????????Human Rights/Third World

·????????Military/Armaments

·????????Gambling

·????????Nuclear Power

·????????Pornography

·????????Tobacco

Yes, it’s a long list, but we’ve included it in full here, not least to show that there could be some in-depth thinking to do.

You want to be in charge of what other people do with your money. Responsible investing helps to build a better world and a sustainable future. The recent COP 26 summit has started to pull together urgent pieces of the environmental jigsaw. Would you like to be a part of the whole picture? ?

Get in touch with Delaunay – and we’ll start the discussion today.