COP26 shines light on ethical investment

02.11.2021
Sharon Mattheus
Financial Planning

As the COP26 summit gets underway, the world’s attention is focussed on what action we must all take to secure the planet for future generations.

Attention will mainly be on what governments are going to do to tackle the issues caused by climate change.  But pressure for that action is coming from individuals, who are finding their voice and having a real influence on political decision-making. 

But it is not just in the political arena that people-power can force change; increasingly this is happening in the corporate world.  Consumer choices are influencing what companies do and the way they do it, and so too is the rise of the ethical investor. 

Ethical investing used to be quite a niche thing.  A small number of people were prepared to accept potentially lower returns on their investments as a result of spurning the option to put their money into arms manufacturers, tobacco giants, companies which relied on child labour, and other ‘sin’ stocks. 

But now ethical investing is becoming mainstream, with the younger generation in particular becoming more discerning about where their money ends up (that shouldn’t surprise us – after all, it is the younger generation which is going to have to deal with the fallout from the damage caused by their forebears). 

Nowadays ethical investment isn’t just about avoiding ‘sinners’; it is also about making positive choices to support individual companies and sectors which are acting in an ethically positive way.

What’s more, the list of ‘no-go’ areas for ethical investors has expanded, with fossil fuels firms, meat producers, fast fashion, and perceived corporate tax-dodgers joining the more traditional list of unethical investments.

The good news is that investing ethically no longer means sacrificing performance on your portfolio.  Increasingly, ethical funds are out-performing the market; given that sectors such as renewable energy are booming, and that consumers are increasingly spending their money with firms which take their ethical responsibilities seriously, it’s easy to see why.

Providers are very active in this segment of the market, and every month we see new ethical investment products come onto the market. 

We are already seeing fossil fuel companies starting to adapt to more sustainable sources, and a big part of this is an eye on their future ability to attract investors.  As individuals make ethically positive choices, funds will have to sit up and take notice, and this will in turn redirect money away towards sectors which are having a more positive impact on the world. 

Choosing to be an ethical investor is no longer a niche choice, nor does it mean your portfolio will perform any less strongly than before.  As a new generation of investors emerges, much more clued-up about the world they are going to inherit, ethical investment will only become more mainstream – and ultimately that is likely to do more good than politicians showboating at an international climate summit.

If you are interesting in learning more about ethical investing

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