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Ethical Investment Guide

FAQ

Frequently Asked Questions

What types of ethical investment are available?

There are ethical Unit Trusts, OEICs (see our UT and OEIC Education Guide for more information), Investment Trusts, Insurance Bonds and Pension funds, Individual Savings Accounts ( see our ISA Guide ) and other savings schemes. You may also have an ethical mortgage. The majority of funds that invest ethically are Unit Trusts or OEICs.

How do I choose an ethical fund?

To choose an ethical fund you first have to identify the issues that most concern you. If you are unsure about which ethical, environmental or social issues to focus on or want to know more about a particular area, EIRIS (Ethical Investment Research Service) has detailed and comprehensive information on their web site: www.eiris.org

Each fund should state their investment policy, and provide you with information on the companies in which they invest.

There are over 100 ethical retail funds to choose from so it may take some time to decide which one is right for you. You may also want to take the performance or cost of the fund into consideration. If you are unsure about any investment you should seek the advice of an Independent Financial Adviser, making sure that the one you have chosen is active in deploying and monitoring ethical policies.

Who determines what is ethical?

Ultimately it is you who decide what is ethical. A non-smoker for example, may not want to place their money in a fund that invests in tobacco companies, or a vegetarian may want to avoid any fund that has holdings in meat retailers. Each fund will also have a different idea of what is acceptable. Some management groups have an in-house team who screen companies for investment and decide what issues are most important; others use external consultants such as EIRIS to guide them.

What are the risks?

As with all collective investment funds (pooled investments that invest in equities and other securities) there is some risk involved. It depends upon the length of time you hold the investment and the fund you choose; you should consider a medium to long term investment period of five years or more. There are top performing funds and poor performing funds in every sector and the worst scenario could see the value of your investment drop.

In the 26 years that ethical funds have been in the market, many have claimed that the funds have an added risk because of their limited investment universe created from strict negative screening methods. Past performance has shown that some ethical funds have achieved returns better than the average. The introduction of lighter green funds and new investment processes means that the ethical investor has a much larger market to choose from.

How do I invest in an ethical fund?

An ethical Unit Trust, OEIC or ISA can be bought direct from the management group, via a stockbroker, financial adviser or fund supermarket. You can invest in an ethical Investment Trust by contacting the trust itself or through a stockbroker (there are some web-based stockbrokers available). You should always check that the fund suits your ethical principles by reading the Key Features document and the fund manager's statement.

For the less experienced investor it is always advisable to go via an authorised Independent Financial Adviser, who can help you select a fund that suits your needs and also complete all of the transactions on your behalf. Remember that not all IFAs have ethical expertise. You can view a list of ethical IFAs on the EIRIS web site ( www.eiris.org ); they also give you some tips on what to ask.

How do I find out what ethical funds are available?

You can view a list of ethical funds on FE Trustnet. Select 'Ethical' from the sector drop down list on the price and performance pages. When you have invested you can also monitor the value of your ethical trust on a daily basis using the prices published on web sites, including FE Trustnet, and in financial papers.

Where can I get more information on ethical investment?

There is a wealth of information available on ethical investment. Here are just a few web sites to get you started (FE Trustnet does not endorse these organisations, nor are we responsible for the content on their web sites):

Ethical Investment Research Service www.eiris.org

Carries out independent research into corporate behaviour. This site has an ethical IFA directory and detailed background information on the issues involved.

To access the EIRIS IFA Directory from the homepage link above, click on 'EIRIS Services' and it will be listed under EIRIS services for private investors. You can search the Directory by company name or postcode.

Investment Management Association www.investmentfunds.org.uk

Has an ethical investment factsheet, also lists positive and negative criteria.

UK Social Investment Forum www.uksif.org

Promotes and encourages SRI in the UK.

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