The most well-known approach to ethical investment is negative screening. This involves avoiding companies or sectors of which you disapprove.
Such sectors might include arms, fossil fuels, alcohol, gambling or pornography. You may also wish to avoid companies in any sector that offer poor pay and working conditions or which avoid paying tax.
In recent years, there has been an increase in positive screening. This is about investing in companies that you regard as ethical or industries that you believe are socially beneficial – perhaps social housing or renewable energy.
The term “impact investment” has been coined to refer to investment that is motivated by a desire to benefit society at least as much as by the aim of making money.
Another aspect of ethical investment is critical engagement. This involves engaging with a company in which you hold shares to improve its policies and to make it more ethical. This tends to happen when an investor has an ethical objection to an aspect of a company’s work rather than to its business as a whole. For many ethical investors, the hardest decisions are about whether to engage with a company that is behaving unethically or to divest from it.