'Ethics' is a term to describe a code of behaviour, and this can apply to virtually anything, and is very subjective.
By investing ethically you can assist companies who adopt responsible policies towards the environment and both human and animal rights, along with companies who create products or services specifically geared towards these areas. A lot of companies now give full disclosure of their business practices, often easily available on the internet. If you are unable to find the information you are looking for you may be able to get further assistance from organisations such as Amnesty International, Greenpeace or the Ethical Investment Research Service (EIRS).
The next course of action would be to find an ethical fund management company with a good quality fund range. They will screen companies for negative ethical factors such as arms, tobacco, deforestation and animal testing. They may also choose to screen for positive factors such as recycling and the use of sustainable energy. Another method is engagement, where the manager will actually push for the company in question to improve its policies and practices.
Some people may worry that ethical companies could give worse financial results than those with less ethical practices. The World Trade Organisation is beginning to clamp down on unethical practices and so ethical companies will evade the negative press that may come with being a company under scrutiny.
A downside of ethical investments is that they may underperform when compared with more mainstream products. However, this isn’t necessarily a permanent factor, as we are forced to become more conscious of the state of our planet sectors such as renewable energy are likely to rise. The advent of green energy may mean that for the first time, the profit hunter and the ethicist have a shared path.
If you talk to an IFA they will help to identify the best ethical investments and will introduce you to the much wider range of niche ethical investments that are available offshore.