Many ethical investors buy shares in industries and sectors they see as beneficial as a whole, such as renewable energy, recycling, environmental technology, public transport or social housing.
Others select and invest in companies they believe to be more ethical than other companies within the same sector. This is sometimes described as the “best in class” or “best of sector” approach. These may include companies in a particular sector judged as having especially good policy and practice in terms of working conditions, equal opportunities, energy efficiency, recycling, or support for Fairtrade or community projects.
Putting your money into a fund that will manage your investments is an option if you consider it to be an ethical fund, although it is worth looking into the detail of the funds that make this claim, as their understanding of ethics may not be the same as yours. You can look at funds that focus on impact investment for particular concerns, and choose one that reflects your own concerns. For example, there are funds that put money specifically into environmental technology, or into housing. Or you may choose to consult an independent financial adviser specialising in ethical investment and ask him/her to find funds that suit your own criteria.
Responsible investors often argue that positive screening is closely linked to financial performance, because companies that are well run in terms of people management, community relations, environmental impacts and corporate governance are thought more likely to be financially sound investments.
While this appears demonstrably true in a significant number of cases, especially over the medium and long term, there are also many instances where high profits have been made, often in the short term, by exploiting workers and cutting corners regarding environmental protection and the rights of local communities.