Make money the ethical way

The market for ethical and green investment is booming. Find out how to invest in a way that contributes to society...and makes money as well.

It’s fair to say that many investors are sceptical about the benefits of green and ethical investments. How can these be worthwhile if they get in the way of making a solid profit? Yet while that might have been a fair point ten years ago, right now the market for ethical investment is booming. You can find investment projects that benefit society or the environment, and at the same time make good financial sense.

There’s a clear trend for more green and ethical investing. According to Experts in Responsible Investment Solutions (EIRIS), approximately £9.5 billion is now invested in UK green and ethical retail funds, up by almost four times since 1999.

A survey in October 2009 showed that 90% of fund managers believed that their portfolios in Socially Responsible Investment (SRI) had performed just as well as their other investments. Moreover, the future is bright for green and ethical businesses, as the effects of climate change make governments and consumers invest more in carbon-friendly, ethically-produced products.

So what practical steps can investors take to make profitable, ethical investments?

Focus on projects that mean most to you

There’s not much point making an ethical investment in an area that you don’t really believe in. Focus on projects that have a personal appeal to you. For instance, if you are concerned about climate change, think about investing in renewable energy providers. Having a personal interest in the area will make you more likely to stick with the project in the long run, which will increase your chances of getting a good return.

The other way to do it is to avoid projects that you feel have a negative social or environmental effect. After the crisis in the Gulf of Mexico this year, oil drilling might fit into this category.

Look for long-term, not short-term gains

It makes sense to look at performance over the medium to long term. There's a strong argument that changes in the environment and consumer habits in the future will give more socially responsible businesses a competitive advantage. It may take a few years before they start providing solid returns. But you do have the security that (as long as you pick the right area or project) the demand for these goods is likely to grow in the future.

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You don’t have to go all-green

Particularly when you are starting out in ethical investment, there is no need to put all your eggs in one basket and focus solely on green or ethical projects. It might be easier to create a mixed portfolio, where you spend time and resources on a few ethical projects, while also keeping the bulk of your other investments.

Get advice and information before you invest

National Ethical Investment Week runs from the 7th to 13th November. There will be a mix of advisors, charities, trusts, NGOs and community groups there, allowing you to learn more about being successful in ethical investing. It’s also worth checking out the NEIW website, which provides advice for investors. The Ethical Investment Association is a group of financial advisors on ethical investing that can help you make the best investment.

Here’s a table of the top-performing ethical funds over the past year, according to Interactive Investor.

Source: Interactive Investor

Tell us what you think about green and ethical investing

Is it the best way to invest in the future, or just a campaign by sandal-wearing liberals that gets in the way of making a good profit?

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