What Are The Main Ethical Investment Strategies?

Essentially, fund managers use one of four main ethical investment strategies to help them select stocks (or equities) for their portfolio's. These are:

- Preference. Companies within an industry or sector are rated for their policies and performance against environmental or social criteria. Fund managers often look for a 'best in class'.

- Thematic. Themes are used to try and identify industries or stock market sectors which have the potential to influence the world in a positive way.

- Ethical screening. Companies are either included or excluded on investment grounds for their ethical policies and behaviour before a fund manager even looks at them! The fund manager is then choosing investments from a selection of companies which already meet high social or environmental standards. - Positive engagement. There are many companies who 'could do better' and fund managers may purchase blocks of shares in this type of stock. Once bought, the manager uses his influence at boardroom level to try and pressure the company to change policies and behave in a more responsible manner.

As you might imagine, it is important for each fund to announce their policies so that investors can clearly see which types of business are included and excluded.

There are companies which offer independent ethical research to help fund managers. They act as an ethical policy monitor to keep watch on an ongoing basis.