The most cursory glance at what makes up the FTSE 100 or other equivalents, will reveal a nicotine-infused, oil-seeping, booze-promoting collection of companies, which pretty much reflect the human desire for warmth, intoxication, cheap kicks and random highs. For example, British American Tobacco, Shell, BP and Diageo (makers of brands such as Smirnoff and Gordon's), make up almost 25% of the FTSE 100.
This does not sit well with everyone. And one of the more powerful ideas I hear around investing, is the idea that we can collectively vote with our moneyed feet, about which companies we back. You kill our planet, we kill your revenues and your balance sheet. So far so good.
Trouble is, we don’t live in a black and white world of nice polar bears versus evil people in pinstripe suits. What if a company produces oil but is investing in clean energy research, has a zero gender pay gap, pays above minimum wages and schools its workers’ children? Enter stage right a variant called ‘impact investing’, which loosely believes that you stand more chance of changing the world with a seat at the (boardroom) table, than waving placards from outside.
Two options today from the big brands include the L&G Ethical Trust, (which invests in FTSE 350 Index companies selected according to ethical and environmental guidelines), and the Barclays Multi-Impact Growth Fund, (which aims to change behaviours and focusses on social change, sustainability and impact). These are individual funds which can be held as part of a balanced portfolio.
Less confident investors who don’t want the pick and mix of individual funds can now look at ‘ethical’ portfolios from 3 robo advisers - Moola, Wealthify and Wealthsimple – along with pension consolidator, PensionBee.
Continuing the theme of investing according to beliefs, this week we saw the launch of Wahed, a Shari'ah-compliant robo adviser (four words I’m not sure I ever thought I’d string together!). Halal investing basically forbids investing in things that may cause harm to human beings or other elements of creation, for that matter - i.e. the environment. Banks, insurers, entertainment and alcohol companies are generally out, and there’s often a strong overlap with socially responsible investing.
What do you think? Flawed fad? Or the dominant investing path of the future?