Future of Money – Save and Invest Part II

                                      Ethical Saving and Investing

By putting money in a savings account, the bank or building society can lend your deposits to firms to support and grow their businesses. If you invest in shares, fixed-interest or investment funds, you are even more directly investing in businesses. Ethical saving and investing lets you be selective about which firms you help.

Definition of Ethical Saving and Investing

Generally, there is no single definition of ‘ethical’. Each person may have their own view of the types of industry they feel unhappy to support or those they would like to actively support.

You might be concerned to avoid firms that employ child labor, while your neighbor’s priority might be green technologies to fight climate change. Similarly, different ethical products take a different stance on the investments they reject (negative selection) and those they support (positive selection).

Selecting Ethical Savings or Investments

To save or invest ethically, you need to research the banks, companies or investment funds you are thinking about to see what ethical principles (if any) they implement and whether these are a good match to your own principles.

However, if you are looking for Sharia-compliant savings and investments, Islamic law sets out the principles to be followed, including, for example, avoiding investments related to pork, gambling and pornography, or the earning of interest (which is considered to be exploitation – similar to the usury laws that used to apply under Christian law).

Shariah Funds – These funds may be of interest to Muslim and non-Muslim ethical investors alike, as they tend to avoid investment in areas like alcohol, tobacco, gambling and pornography. Restrictions are also in place on investing in banks or other financial institutions due to the prohibition on excessive ‘gearing’ or interest-charging. Non-halal and pork meat industries are also excluded.

Choosing Ethical Savings or Investments

To save or invest ethically, you need to research the banks, companies or investment funds you are thinking about to see what ethical principles (if any) they implement and whether these are a good match to your own principles.

Ethical savings accounts and funds often avoid investing in industries such as tobacco, nuclear power and arms.

They may also seek to invest in ‘positive’ businesses like renewable energy, sustainable timber and waste management. Furthermore such funds and accounts can generate returns as healthy as their non-ethical equivalents.

If you’re serious about social and environmental issues, then choosing an ethical fund or savings account represents a long-term investment, not just in your financial future but the world’s future too.

Types of investment funds and ISAs – Also known as socially responsible investment (SRI) funds this type of investment generally seeks to avoid certain types of businesses while investing in socially and environmentally beneficial ones. Industries most commonly excluded by ethical funds include alcohol, tobacco, gambling, pornography, animal testing for cosmetic purposes, genetic engineering, intensive farming, armaments and nuclear power.

Author: Michael Welter

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