Ethical investing has become a growing area of interest in recent years, with terms like ‘sustainable’ or ‘responsible’ investing also common. While the terminology can seem confusing, behind it lies a straightforward idea; money can be invested both to generate returns and do good (or at least minimise harm).
Ethical investment may be seen as falling into the ‘nice-to-have’ but non-essential category but is actually crucially important. It permits anyone with savings, including in pensions, to contribute to the betterment of society or to help with environmental issues including global warming. This becomes clear by exploring the relationship between sustainability and finance, which, in turn, sets the background for ethical investing.
Unsustainable human activities have generated threats including climate change (associated with rising sea levels, extreme weather and flooding, for example) resulting in damage, loss of life, and disruption to food and fresh water supplies. Lengthening life-span means demographics will have an impact on healthcare and pension costs. More of a growing world population will demand improved living standards as less developed countries modernise. Responsible investors argue that behaving unsustainably will cease to be an option.
Q G Rayer (2019), Introducing ethical investing, The Private Investor, the newsletter of the UK Shareholders’ Association, issue 199, April, p12-13, 12th April 2019.