What is ethical investment?

	Homes of factory workers in Mexico

Strictly speaking, ethical investment is nothing new. It has been practised by some faiths for decades and has grown up in response to the question: ‘What is my wealth being used for?’

While many activities can generate profit, not all do so in a way which adheres to certain ethical standards which many of us take for granted. As Naomi Klein notes in her recent book, No Logo, ‘The travels of Nike sneakers have been traced back to the abusive sweatshops of Vietnam, Barbie’s little outfits back to the child labourers of Sumatra… and Shell’s oil back to the polluted and impoverished villages of the Niger Delta’.

There are three principal ways that an organisation can pursue an ethical investment policy:

• it may seek to avoid investment in company groups whose activities compromise its ethical concerns and objectives through negative screening

• through a best in class and/or positive screening approach, it may actively support those that make a positive contribution to society in general or its own cause in particular

• it may use the right of shareholders to discuss with companies how they can improve their performances through an active dialogue programme

In our view, the most successful strategies involve a mix of all three.

Link to International Interfaith Investment Group (3iG).