22 Oct 2024
In a world facing complex social, environmental, and governance challenges, investors are increasingly looking to align their financial goals with their values. This article explores the fundamentals of ethical funds and reveals how our specialised investment solutions combine client-led ethical exclusions with rigorous stock selection to construct true and transparent responsible investment (RI) portfolios.
Ethical investing goes beyond traditional financial metrics. It incorporates a deeper consideration of the impacts and implications of investment decisions, aligning investments with clients’ values. This approach promotes corporate social responsibility by considering environmental, social, and governance (ESG) factors alongside financial performance.
Ethical investing avoids controversial areas like gambling, tobacco and alcohol amongst others (see screening policy for more details), meaning investors can rest assured that their savings are not associated with these sectors. This approach aligns with specific client preferences but may not suit everyone’s investment goals. Some investors prefer to invest in these industries to influence how their investments generate returns.
The results of excluding sectors that are deemed to be harmful to the environment or society means that an ethical fund invests in companies that are naturally better in terms of environmental practices and a fairer, more inclusive future, while still aiming for competitive financial returns.
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Author | Miranda Beacham, Head of UK Responsible Investment
Miranda Beacham is head of UK responsible investment. Her role involves overseeing the environmental, social and governance research process for ethical and sustainable funds as well as overseeing the stewardship activities, supporting the ESG integration processes and further research in ESG issues for investments across Aegon AM UK.