Ethical Investment

Question 1

The Approaches

Answer 1

• Positive Screening
• Negative Screening/Avoidance - tabacco, animal testing, military arms
• ESG
• Enviromental e.g single use plastics SUP, carbon foot print, reduce carbon footprint
• Social e.g H&S and Local policies, working conditions
• Governance e.g operations, workforce diversity, community interaction and support
• Impact investing - measureable social benefits, accounting standards

Question 2

9 points workshop Q

Ethical investing drawbacks that need improved on

Answer 2

• Less diversification and restricted fund choice
• Increased volatility and higher risk
• Typically higher charges
• Limited growth or poorer performance due to long term investment in this area
• Limited opportunity for dividends
• Potentially lower growth
• More likely smaller companies or start ups
• Need for higher monitoring
• Hard to screen large companies as they tend to be more opaque

Question 3

Ethical investing positives

Answer 3

• Doing the right thing for the environment and own peace of mind and align with values
• More potential for growth in the future
• Encourage companies to be more environmentally, socially and ethically responsible

Question 4

7 points

• Outline the key difficulties that Sally migh encounter when ensuring **any of her ESG **interests are met from her investments

Answer 4

• Large companies such as multi nationals are opaque
• Lack of diversification
• Different levels and methods of SRI investment labels used
• Difficulty in identifying underlying stock within general funds
• Risk of Greenwashing
• Ongoing monitoring required
• Higher charges due to

Question 5

Tom and Sally have expressed an interest in ESG investments. State the actions that a financial adviser should take* regarding this interest when advising them on their investments

Answer 5

• Explain ESG investing and screening/shades of green
• Establish Tom and Sally’s opinion and specific areas of concern
• Research information on ESG
• Assess thier current investments in relation to ESG
• Realign the portfolio where necessary
• Document ESG position and any changes made

Question 6

Explain to Tom and Sally how they could gain exposure to gold as an investment in their portfolio

Answer 6

• Directly in shares in goldmining companies
• Funds/Collectives that invest in gold
• ETFs & ETC
• Can be held as physical asset such as bars, coins or jewellery

Question 7

5 benefits and 5 drawbacks of holding gold

Answer 7

Benefits
* Safe haven asset
* Gold non correlates with other assets
* There are different ways you can invest in gold collectives,ETF/shares
* Hedge against inflation and the dollar
* Used as an alternative asset for a diversified asset allocation in a portfolio

Drawbacks
* Costs in insuring and storing for physical assets
* No dividend from physical assets/low from ETFs
* Physical asset hard to sell/iiliquid
* ETFs NPV are very expensive to invest in
* When rising interest rates/or dollar go up gold tend to perform poorly
* Volative and lose value