Ethical Investments

Question 1

Adviser should consider

Answer 1

• How strong client’s beliefs are
• Incorporating values and views into investment process
• Recommending products/funds appropriate for personal and financial needs
• Restricted choice of funds/less diversification?
• Higher charges than non-ethical equivalent?
• Likelihood of different performance/volatility

Question 2

Positive Screening

Answer 2

Firms are screened in if they take social responsibility seriously
If they make a positive contribution to society and environment

Question 3

Negative Screening

Answer 3

Screen out firms involved in harmful activities (tobacco firms/arms manufacturing)

Question 4

Best in Class

Answer 4

Invest in sectors such as energy production, but only if they have better records than other firms in sector

Question 5

Shades of Green

Answer 5

Shades of green as to whether they would be classed more as positive or negative

Question 6

Social Impact Investing

Answer 6

Offers financial exposure to organisations that carry out socially valuable activities
Companies practicing positive efforts

Question 7

Key Issues when thinking about socially responsible investing (areas people may want to avoid/persue)

Answer 7

Environmental Issues
War & Arms Manufacture
Social Policies (exploitation of labour)
Animal Welfare
Tobacco and Alcohol

Question 8

SRI Drawbacks

Answer 8

Restricts investment choice
Restricts investment advice
Excludes lots of larger companies, therefore smaller companies are chosen but are more likely to be more volatile
Needs active investment - higher costs
Difficult to screen companies - they aren’t always transparent

Question 9

SRI Benefits

Answer 9

Forward thinking/progressive companies - long term growth
Areas of operation eg environment - promising for investment success in future
Oldest/Largest SRI funds are not noticeably poorer or more volatile

Question 10

Consider client themes

Answer 10

What themes the client is concerned with

Environmental issues?
Animal rights?