Avoidance

Probably the best known approach to ethical investment is avoidance. This means not putting your money into industry sectors or companies with which you disagree.

Of course, people differ from each other in the sectors that they wish to avoid. Some of those most commonly covered by avoidance policies include:

  • Arms
  • Fossil fuels
  • Alcohol and tobacco
  • Gambling
  • Pornography
  • Abortion and euthanasia
  • Animal testing

Many churches avoid some of these but not all. At a national level, most churches in the UK now avoid companies that make most of their money from arms. Churches with a temperance tradition, such as the Salvation Army and Quakers, are more likely to avoid investing in alcohol, while Roman Catholic bodies usually avoid companies involved in abortion.

In 2013, the Christian environmental network Operation Noah launched the Bright Now campaign, calling on churches to divest from fossil fuels. Shortly afterwards, British Quakers became the first denomination in the UK to do so, although similar decisions had already been made by a few churches in Australia and the US. Many UK churches are now facing growing calls to divest from fossil fuels.

Instead of avoiding a whole industry, some investors avoid individual companies that they consider to have behaved particularly immorally. This is often true when it comes to business practices such as tax avoidance and low wages. The Church of England divested from News International following the phone-hacking scandals of 2011-12.

The Charity Commission has recognised the legal right of faith groups and other charities to avoid certain kinds of investments where these “would for practical reasons conflict with the aims of the charity”. This does not mean that trustees have free rein to make personal decisions that are not connected to the charity’s aims.

Avoiding particular industries is not as straightforward as it sounds. Many transnational corporations are involved in a wide range of activities. A company or fund may be largely acceptable as an ethical or responsible investment but may have a subsidiary element that does not comply. The Church of England will not invest in a company that makes more than three percent of its turnover from pornography, more than ten percent from arms or more than twenty-five percent from alcohol. The Church of Scotland sets a limit of fifteen percent for all these products. Some churches adopt a “zero tolerance” policy to certain sectors. Both the United Reformed Church and the Religious Society of Friends (Quakers) rule out investments in any company involved in producing weapons.

On the other hand, the Methodist Church does not use percentages at all, saying that they look at each company individually. Both approaches have their advocates and their critics. Whichever approach you take, research is important. There are a number of organisations and websites that can help with this.