Ethical Investments

You’d expect there to be a trade-off between ethics and profits when it comes to investments. But last month the independent comparison website moneyfacts.co.uk found that investments in the ethical sector have been growing faster than mainstream investments during the last year, and also over the last three years, within the UK.

“The average ethical fund has posted gains of 24% over the last year,
compared with 18% growth from the average non-ethical fund”.
– Moneyfacts.co.uk

I found this quite surprising, given the current economic climate. Of course, economic growth in general is causing more problems than it’s solving in the world today, because our global economy is too big for the biosphere to sustain. I honestly think countries like the UK should begin to look towards transitioning to a steady state- a no-growth economy with a sustainable scale and focus on human well being. To reach a sustainable scale, a temporary period of degrowth will be necessary. So from that point of view, even green growth becomes oxymoronic and not as innocent as it seems. However, post-growth economics has a long way to go before it’s accepted as a national goal, and being realistic about the shorter term, ‘green growth’ is a lot better than standard growth.

So in that light, this news about ethical investments raking in the cash is a cause for celebration. Ethical investments avoid certain industries such as fossil fuels, the arms trade, genetic modification, animal testing, tobacco and nuclear power, and the best ones focus on industries that have a positive impact such as renewable energy and waste management. I’d be even more jubilant if all investments in the category were this proactive, but most of them just avoid the worst stuff.  Still, ethical investments have really taken off, as their performance at first was pretty meagre and experts predicted they wouldn’t grow above £500 million in the UK. 10 years ago they had reached £4 billion and now they’ve reached £11 billion. Hopefully this will be sending a clear signal to well-meaning investors everywhere that they can make money while maintaining some morals!

Most of us may not be of the investor class, but we do have bank accounts. Banks invest our money (plus extra funds that they create out of thin air, via the magic of fractional reserve banking) by loaning it out to businesses. I’m sorry to say that if you use one of the larger high street banks then your money is in all likelihood being used for all sorts of nasty ends that you probably wouldn’t agree to if you were asked.

I use the Co-Operative Bank because not only do they offer decent overdrafts on their student accounts, they also have a comprehensive ethical policy. It covers human rights, international development, ecological impact, animal welfare and social enterprise. I was happy to see they reject fossil fuel and factory farming companies, among other commitments, and they make an effort to invest in renewable energy and social enterprises. They also made some commitments that I hadn’t even considered, such as rejecting companies that sell arms to repressive regimes or torture equipment! The fact that they even mentioned this implies that, scarily enough, other banks do invest in this kind of stuff. If you’re interested in ethical banking, then check out Triodos Bank as well as the Co-Operative Bank.

I think it’s really important to think about where our money goes, as well as where it comes from. Learning to take ethics into account while investing could be the stepping stone we need before embracing the transition to a steady state economy. To be fair, it’s not long ago that anything green was considered pretty niche. I think we can safely say that ethical investing is a huge step in the right direction!

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