Taking control of your money is increasingly about making sure it’s invested in an ethical way. There are several good options for socially responsibly investors in the Irish market.
Interested in investing your pension or savings in an ESG-rated fund? Visit our ethical funds centre to find out more.
What’s ethical investing?
Ethical investing (or socially responsibly investing) comes in many forms, some more stringent than others. The common theme is a set of ethical principles which are about more than simply making money.
For example, many ethical investment funds refuse to invest in arms or tobacco.
Some have an environmental focus and shun oil and gas companies.
Other ethical investors focus on social benefits, such as avoiding alcohol stocks, or a commitment to high governance standards.
So there’s a wide variety out there to suit different tastes.
Good ethics can pay
Ethical investing can deliver strong returns.
Because the funds have avoided some traditional heavy industries, they often have an emphasis on technology, financial services and innovative sectors which have grown rapidly in recent years.
What’s out there?
One of the original ethical investment funds in the Irish market is the Stewardship fund, run by Friends First. It has returned 7.2% per year on average since its inception in 1997, and 13.0% in the last ten years. It focuses on environmental sustainability.
Since June of 2017, it has been fossil-free, having sold all its oil and gas investments.
Some of its biggest investments are in Apple and Amazon. It owns stakes in water company Xylem, and financial companies Mastercard and Prudential.
Then there are other, more specialist ethical funds.
For example, Shariah-compliant funds will generally only hold investments that are approved by an committee of Islamic scholars. In particular, these funds avoid debt (or heavily indebted companies).
To take another example, the Lyxor Global Gender Equality fund is focused on investments which lead on gender diversity – among their management and employees, as well as when it comes to issues like parental leave and equal pay. The thinking is that these attributes lead to more sustainable businesses. Top investments include Avon, Coca-Cola Europe, and Hershey.
Consider the balance
Because they are specialist funds, ethical investments typically don’t offer the diversity and relatively smoother performance of multi-asset funds.
If you’re set on investing through an ethical fund, it’s worth considering how to balance those investments with other asset classes.
Many of these funds are relatively small, and their performance can be more volatile than a larger fund holding lots of investments in many different industries.
So depending on your appetite for risk, for example, you could consider allocating some of your investment to a bond fund to balance your investment.
Interested in investing your pension or savings in an ESG-rated fund? Visit our ethical funds centre to find out more.
