Holly's blog: Ethical investing. Fad or the future?
By Mike Narouei, Content Producer at Boring Money
19 Oct, 2018
Our first report into Ethical Investing asks what people on the street think about this. To find out we talked to 2,000 UK adults, ran a survey with The Times and also talked to our own readers - you guys! Loosely speaking we note three camps – the ‘Grumpy Old Men’, the genuinely sceptical, and the interested.
We asked people what ethical investing meant to them. Here’s a sample of the answers in descending order of scepticism!
“Like something the Lib Dems would do.”
“Losing your shirt.”
“A politically correct fantasy.”
“Ethical investing means investing in someone else’s ethics, not always mine.”
“I am bothered about investing in tobacco but it’s a double-edged sword really as that’s where the money is to be made.”
“Peace of mind I am not funding sweatshops or exploitation.”
Data also tells us that women are much more interested in this than men. Amongst The Times readers, 33% of women said that investing ethically was either very or extremely important, compared to just 14% of men. Now we could interpret that in two ways. We could say that women who read The Times are much nicer than their male readers! Or we could say that there is a general correlation with existing investors in general being less enthusiastic about the new-ish concept of ethical investing, and that those same investors are statistically much more likely to be men.
Don’t shove your ethics down my throat
So, what actually is it? There’s an assumption that it’s all about negative stuff. Blacklisting. Saying no to fags, oil and gambling. And of course this quickly gets very complicated, as moral codes are subjective and personal. We don’t like the idea of having someone else’s moral code shoved down out throats. (That said, arms/weapons, tobacco, gambling and pornography are four very clear cut sectors where the vast majority of people agree they don’t want their money to go.)
More interesting I think, is the concept of 'impact investing'. The idea that our money is used to support renewable energy. Health developments. Water. Agriculture. Education. Conservation. And socially responsible companies with progressive governance. Suddenly this is not a story of what we give up, but a story of what we have to gain. It’s not “yes, but” rather “yes, and…”
Will I make less?
The big elephant in the room is of course returns. As someone put it, “You want to make decent returns but you don’t want to bring the country down at the same time!” 65% of The Times readers said they would sacrifice returns of 1% a year, to know that their money was invested ethically. I’m not convinced that this is a trade-off we need to make anymore, but I’m investigating this more over the coming months.
My take on this is that ‘ethical’ or ‘impact’ investing is a bit like the job of eCommerce Manager 20 years ago. That sounds anachronistic today because most of us in business are all eCommerce managers. It’s no longer a side show, but the way in which we work. The eCommerce manager is also the CEO.
I think that we’re on a 10 year adoption curve here, and that gradually asset managers will have to incorporate this into everything that they do if they are to continue to act as stewards of our money. Perhaps the most exciting role of fund managers in this big capitalist merry-go-round, is to act as catalysts for change. Because money talks - “Listen Big Fat Oil Belcher, we own 10% of you and if you don’t get your act together, you can stick it up yer oil well.”
Who offers this today?
Anyone interested in options today could look at the ethical portfolios offered by robo advisers Moo.la (https://emailboringmoney.co.uk/t/4QZH-29OJ-7PDBW-13AKC-1/c.aspx), Wealthify (https://emailboringmoney.co.uk/t/4QZH-29OJ-7PDBW-13AKD-1/c.aspx) and Wealthsimple (https://emailboringmoney.co.uk/t/4QZH-29OJ-7PDBW-13BXO-1/c.aspx). Look at the ethical option on nice pensions consolidator Pension Bee (https://emailboringmoney.co.uk/t/4QZH-29OJ-7PDBW-13AKE-1/c.aspx). Customers of Barclays Smart Investor (https://emailboringmoney.co.uk/t/4QZH-29OJ-7PDBW-13AKF-1/c.aspx) - check out their Multi-Impact Growth fund, and Legal & General are credible here too. EQ Investors offer Positive Impact Portfolios (https://emailboringmoney.co.uk/t/4QZH-29OJ-7PDBW-13AKG-1/c.aspx), and it’s interesting to have a squiz at the funds they blend together to create this.