What Is The Ethical Investment Dilemma?

Anyone who tries to invest responsibly faces the ethical investment dilemma. It is impossible to avoid!

This dilemma really revolves around two simple questions. They are:

'What is or is not ethical?' and

'Who decides?'

After all, what is ethical and responsible to me may not be ethical and responsible to you. We all have different standards - a different moral code, if you will. This means that considerable thought should go into this area to help you decide what you are happy investing in. Alas, it just isn't as easy as 'doing good'. Socially responsible investment funds tend to focus on companies that try to make a positive contribution to the world, environment or people. Many funds also use their power as large minority shareholders for active engagement with the management of a company to try and promote better corporate behaviour.

Some things that it may be helpful to consider are:

- Each ethical fund will be different and have different policies and goals from every other ethical fund. This makes it a potential minefield to select a fund that meets your approval, or have a stockbroker or adviser pick a fund for you.

- It is important to study and understand the different screening processes and filters that funds use. Without really trying to understand them all, it is difficult to pick the one most suitable for you.

- It is also important to give some thought to the other investment criteria which would normally be applied. For example, the financial strength of the investment group, the skills and reputation of the fund managers and the level of resources committed to researching ethical issues.

As you may be starting to realise, the private investor needs to think very carefully about this ethical investment dilemma if he or she is to be successful on their terms.

This is serious thought that might be preventing analysis of potential investments - so it may be wise to try and limit it. Otherwise, an investor may find that they no longer have the time to look for investments and make money!