Ethical Investment funds are designed to only invest in companies, that avoid questionable activities, such tobacco production, arms and weapons manufacturing or processes that pollute the environment.They are tailored for investors who have principals or questions on how there money in tied up and invested. In the UK the Co-Operative Bank have for a long time, refused business customers who pollute the environment.
[http://www.goodwithmoney.co.uk/why-do-we-need-ethical-policies/]
The idea originated in the US, where church investment groups who controlled billions of dollars and often did not want the money used to prop up repressive regimes in the developing world. It became very popular in the 1970s when the Vietnam War led to some investors questioning what their money was funding. Friends Provident the life insurance firm founded by Quakers – set up the first so-called ‘ethical fund’, called The Stewardship Unit Trust, back in 1983.
A good site that recommends other ethical investment funds is :- [http://www.ethicalinvestment.co.uk/Socially_Responsible_Investment.htm]
Here is a good example of a fund that has an ethical investment policy.
The Legal and General Ethical Trust.
Interesting to see the names that this fund holds:- BT Group PLC, Vodafone PLC, Prudential PLC,
The FTSE has an index known as the FTSE 4 Good Index which of course BT is a member of:- [http://www.ftse.com/Indices/FTSE4Good_Index_Series/index.jsp]
In general, an ethical fund manager will run checks on the company to find out if it has interests in a number of positive and negative criteria.
Positive criteria includes:
- Specific environmental protection practices.
Extensive involvement in conservation and recycling measures.
Pollution control.
Ethical employment practices, such as recognising trade unions and treating workers fairly and an emphasis on health and safety
Negative criteria includes:
- Involvement in weapons manufacture.
Pornography
Animal exploitation and testing.
Gambling.
Poor employer relations like a non-union workforce
Involvement in supporting oppressive regimes.
Alcohol and tobacco promotion.
Environmentally damaging product practices.
However, this is not a complete list, and it is hard to determine, on what is ethical or not ethical, it is am imprecise science, but also who determines what is ethical or moral?