- April 22, 2024
- Posted by: legaleseblogger
- Category: Related News
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## Seeking Investment Advice for Ethical Investing
Hello everyone,
I am a newcomer here and I am seeking some advice regarding my investment dilemma. I am currently 21 years old, on the verge of leaving university, and I have a modest savings pot of approximately $5,000. However, I am in a bit of a quandary when it comes to investing.
I understand the importance of not letting money just sit there and lose its value over time. Yet, I am also concerned about the ethical implications of traditional investments such as index funds. I am hesitant to support large corporations and polluters, and I would prefer to invest my money in a more socially responsible manner.
I have looked into green investment funds as a potential solution, but I am unsure of where to begin. I would like to find a way to invest ethically while still generating a reasonable return on my investment. Can anyone offer guidance on how to navigate this ethical investment landscape?
Apologies if I have used any incorrect terminology, as I am still in the process of educating myself on this topic.
Thank you in advance for your help.
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****** just grabbed a
The problem with ESG and other “ethical” funds is that people disagree about what is (and what isn’t) ethical.
E.g. most of them don’t invest in producers of alcohol. But, personally, I don’t think there’s anything unethical about producing alchol.
I drink it, I’ve given it as a gift to others, and when I have (adult) children I won’t feel like I’ve failed as a parent if they choose to buy and drink alcohol in moderation either.
Then, what about cigarettes? Personally, I do think that industry is unethical. But, while many ESG funds screen out cigarette producers, they generally don’t screen out all companies which sell them (e.g. Costco and Tesco both sell cigarettes. Would you have a problem with owning part of them?).
Some people think eating meat is unethical. That rules out lots more.
Some ESG funds class nuclear power as non-renewable and screen out companies in this sector.
Ultimately, regardless of what you invest in, you have to store your money somewhere. So, even if you leave it as cash in a bank, then the chances are your bank could be doing unethical things too.
Personally, I think the simplest thing to do is to buy globally diversified index funds and then seperately give some money to charity, campaign groups, and to be politically active.
First of all, well done for taking sustainability into consideration. You will see some criticise the concept who consider themselves to be “capitalists” but most level headed people will realise that businesses need to be well run & have a sustainable business model to deliver you returns over the long term. That said, there are differences between ethical funds and ESG funds which need to be understood.
Here are a few options for you:
Royal London Sustainable range – actively managed, so not the cheapest but rare to be multi-index. Not as expensive as some dark green funds and are UK domiciled (unlike Triodos funds which are often recommended & also more expensive & available in a single strategy – eg equity or bond funds) – fund manager history derived from Cooperative Banks investment arm, has delivered good returns.
Legal & General Future World ESG range – uses positive and negative screening which is rare for a passive fund, but some would say companies get in which are slightly dubious. That said, it’s cheap and you need passive funds in an investment strategy. Can be done via a multi-index product or as individual funds if you want to have a particular focus (e.g Developed World, UK or Emerging Mkts)
Blackrock MyMap ESG – the best option for low cost multi-index – technically active funds due to tactical asset allocation. Considered suitable for by Monzo and Pension Bee who use the funds. By far the murkiest and most likely
to be considered greenwashed though, and Blackrock are often criticised on ethical grounds generally as a business.
Stewart Investors – active fund managers who have a focus on sustainability, they offer an Asia Pacific specialist fund if that’s of interest.
These are all recommended by the advice network I work for and I have . Hope this helps 👍
The consideration with ESG type funds is understanding if the ESG definition the fund follows meets your own requirements of ESG? Or, whether tou are not that fussy and just want to have investments which have some form of ESG credentials?
There are plenty of ESG funds out there to use should they meet your requirements.
Leftie wanker here: you are doing what the billionaires want you to do.
They want you to jerk off, conflictedly worrying about ESG and whether you’re doing the right thing, cycling to work and reusing your carrier bags, whilst they invest in oil, tobacco and bombs. While they spend their money on 300′ superyachts (their engines running constantly to keep the air conditioning running), while they each have the carbon footprint of a moderately-sized city.
The top holdings in most index funds are companies like Apple, Microsoft, Google and Johnson & Johnson – they make products that the vast majority of us use every day. I don’t really accept that it’s unethical to invest in these companies – not unless you also boycott your mate for having an iPhone or buying elstoplast.
But capitalism requires you to invest for retirement – you are not allowed to spend your life on a little smallholding, like Animal Crossing, raising pigs and growing your own crops. You can get to own a smallholding if you’re born rich enough to buy one, or you work a very well paid job to save the money – likely only if you invest enough throughout your working life, maybe then you’ll be able to afford a smallholding in retirement and end your days like that.
If you eschew investing then the billionaires are just laughing you – at you and your poverty. You are voluntarily giving the profits to them and to anyone else who does participate in capitalism.
Realistically, I think it’s likely that you do have a mobile phone and you do buy mass-produced clothes, even if you’re a bit conflicted about it or try to buy the more ethical versions of these products. You probably recognise that it’s impossible to opt out of the system completely – I suggest you treat investing in the same way.
I believe it is possible to pay extra taxes if you want to, just give money to the government – I’ve never heard of anyone here doing it. It’s much more common for people to say that “people like me should be taxed more” and to hear that people vote against lower taxes because they want to live in a more decent society.
So I don’t see why investments should be any different – that you should have less in retirement just to be nice, or to be a more moral person? Like I say, an asshole would laugh at that idea. IMO it’s better to invest sensibly and passively and choose more ethical policies at the polling booth. Invest in oil and gas, even as you vote to tax it. I view this as an imperfect but well-balanced approach to take – and no approach is perfect, so this is probably about as good as any other.
This podcast episode covers this, and will provide some food for thought: https://pensioncraft.com/captivate-podcast/the-end-of-esg/
these are very commonplace these days so you wont struggle to find something that suits your expectations
while a lot of people mention ‘ESG’ there’s *a lot* of different flavours of it, most funds just tilt the weight based on ESG factors (i.e. the weight of a certain stock is lower than it would have been otherwise), but you’d still be invested in most companies
given your intro i’d expect you might be more looking for something like ‘impact investing’ (google and you’ll find a lot) or SRI funds. These are heavier on outright exclusions from the indices (i.e. whole stocks are taken out entirely). Be aware these tend to be more concentrated and therefore potentially more risky for you as investor.
There are different types of funds that do slightly different things but all broadly fit within the scope of what you’re asking about.
ESG funds might be what you’re after. This stands for “Environmental, Social and Governance”. Broadly they can invest in all the same sectors as index funds, but tend to go heavier into investments that have good ESG credentials. They also tend to engage more with the companies they do invest in to encourage them to do more on ESG concerns. ESG funds would be expected to perform at least as well as non-ESG funds, but might have slightly higher charges as it’s an active investment management style compared to more passive index funds.
Ethical funds exclude certain sectors. These typically include munitions, tobacco, gambling and pornography. Different ethical funds might exclude different sectors and you’d need to check the details of the specific funds you’re investing in if you have specific ethical concerns about specific sectors. Excluding sectors will generally lead to worse diversification and so higher risk or lower returns for the same risk.
Sustainable funds tend to skew away from heavily polluting firms and generally end up being quite heavily tech and finance focused, just because that’s what’s left if you remove oil, gas, mining etc. Again these will tend to have lower returns for the same reason as ethical funds, but the sectors excluded here will tend to expose you to some fairly significant systemic risks in the finance and technology sectors.
Impact investing is where you invest specifically in things that you think will have some positive impact, but are relatively high risk and low return and not what you want most of your investment in. I’m not hugely knowledgeable about this type of fund, but I personally wouldn’t put more than 5-10% of my investments into something like this even if I was fully on board with the objectives.
Of all of these I would tend to favour ESG funds as they offer better diversification and the extra charges could in theory lead to better stock selection and better ESG outcomes for the companies invested in.
Moneybox have a range of socially responsible funds which might fit what you’re looking for
Hi /u/Beautiful_Mud_7722, based on your post the following pages from our wiki may be relevant:
* https://ukpersonal.finance/investing-101/
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^(These suggestions are based on keywords, if they missed the mark please report this comment.)
The most ethical ‘ethical’ funds I have come across are from Triodos:
[https://www.triodos-im.com/investments-map](https://www.triodos-im.com/investments-map)
No ethical consumption under capitalism. Do what’s best for you and that you are happy with
Look at these ETFs for example: PAWS (global, net zero Paris agreement aligned). ESGG (global, ESG no defence fossil fuels etc), LGUK (ftse100 ESG), FASA (ftse all share ESG). Look at detail of the index behind them
I’d put £4K into a LISA and watch the Gov put £1K in as a starter.
Everyone has different ethics, so you’d have to really dig into each ESG or similar funds to see if they align with yours.
Also, most companies are at least somewhat unethical. They could push for overconsumption or use questionable suppliers. They could be very green and forward-thinking, but treat their workers like crap.
Most tech uses materials with a high likelihood of being mined by African slaves. Your bank might work with drug cartels, etc. the list goes on and on.