Last week we wrote about how by investing into funds or a shares in a company, you have the power to influence them and this week we take it a step further with ethical investing.
There is now so much choice out there in terms of picking investments that fit with your values and the way you want companies to act.
Ethical investing can even improve your overall investment performance.
Ethical investing gives you the power
Ethical investing, also known as ESG (Environmental, Social and corporate Governance) is a way of choosing investments that behave a certain way based more on company behaviour rather than just the financial accounts.
That’s not to say the business fundamentals are not important, it’s just that companies that don’t fit within a certain ethical criteria are screened out before the business is looked at properly.
Some of the topics that are often focused on when it comes to ethical investing are:
- Clean energy
- Climate change
- Racial diversity
- Executive pay
- Working conditions
- Physical and mental health
- Political
You may have strong feelings about all of the topics above or you may focus on one or two. The good news is that you will probably find an ethical investment fund that fits your beliefs and invests the way you want.
By choosing to invest in ethical investments, your money is being put to work supporting the things you care about whilst at the same time building more wealth for you.
Ethical investing doesn’t need to mean higher costs and lower performance
There’s a tendency to think that because more analysis of companies is needed when it comes to ethical investing it can be more expensive to invest this way.
In the past this may have been true but not anymore.
For those of you who have been reading our articles for some time you will know that we advocate tracker funds for the core of your investment portfolio. Meaning that on the evidence available we don’t believe it is possible to beat the market consistently.
As tracker funds track a market benchmark they haven’t traditionally screened out companies that don’t fit a certain ethical criteria.
It was always active funds that promoted ethical investments and of course this led to higher costs for the investor.
Now, we are pleased to say that there are a number of ethical benchmarks out there that do ethical screening.
This means there are now ethical tracker funds. Which also means low cost ethical investing.
Another misconception around ethical investing is that returns from this type of investing are generally lower. This based on the fact you don’t have access to all the most successful companies in the world.
The evidence shows this is not the case and it’s actually quite logical why.
Companies involved in some of the ethical topics listed earlier are generally newer, more modern based companies. These companies are working in cutting edge technological areas that is generally where the world is heading e.g. clean, renewable energy.
But rather than just tell you about performance and charges, let me show you.
We have our own ethical portfolios called RTS ESG and the portfolios range from risk levels 1-10.
The underlying investment management cost of these portfolios is between 0.20% and 0.22% per annum. This actually makes them lower cost that our flagship RTS Investment Strategy.
In terms of performance, our low cost, evidence based ethical investing strategy has outperformed some of the biggest and most popular managed portfolios out there that don’t focus on ethical investing.
If you would like to find out more about ethical investing and our own low cost ethical portfolios then please get in touch for a no obligation chat with a Chartered Financial Planner.
Risk warning:
Stock market linked investments and any income from them, can fall as well as rise and is not guaranteed. Any figures quoted are for illustrative purposes and should not be taken as a forecast or guarantee. Past performance should not be seen as an indication of future returns and clients may get back less than they have invested.
