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Put your money where your mouth is with ethical investments

ARE you interested in the idea of making money but also making the world a better place?

You are not alone. A recent survey of Irish savers found that more than half are keen to put their cash into ethical investments. Indeed, ethical and socially responsible investment funds are one of the fastest-growing areas of personal finance.

Such funds pool investors' money and then use it to buy shares in companies that meet pre-defined criteria. For example, one fund might only invest in companies that behave in an environmentally responsible way, while another might focus on companies that aren't involved in the exploitation of people or animals.

The history of ethical investment can be traced back to the 19th century. It began when religious movements, most noticeably the Quakers and Methodists, recommended that their followers withhold investment from companies that didn't embrace temperance and fair employment conditions. Over the course of the 20th century, the use of ethical criteria when choosing between investment options spread -- especially among churches, charities and non-profit organisations.

Objectives

In 1971 the first ethical investment fund, the World Pax Fund, was founded with the declared objective of not supporting companies that were profiting from the Vietnam War. During the 1980s opposition to the apartheid movement in South Africa and environmental concerns gave ethical investment a boost and many more funds were established.

If you plan to adopt an ethical investment strategy, the first step is to consider what issues matter to you. You may not wish to profit from animal testing, genetic engineering, environmental destruction, inattention to human rights, intensive farming, nuclear power, arms, pesticides, pornography, deforestation, alcohol, tobacco and low pay or poor conditions for workers.

There may be activities you wish to support through your investment. These could include companies with a good track record of community involvement, environmental care, corporate governance and generous treatment of employees and suppliers.

Profit

One of the most prevalent myths concerning ethical investment is that the profit element will be less than if you invested without taking ethical considerations into account. If you look at the overall statistics ethical funds have produced above-average returns, even allowing for the costs of extra screening. Many funds perform even better. There are various reasons for this. Ethical fund managers study the companies they are considering investing in much more vigorously than their non-ethical colleagues.

In the UK, Europe and the USA there are hundreds of ethical and socially responsible investment funds to choose from. As with any investment decision, you should take professional advice before taking action so that any planned investment will meet your ethical as well as your profit objectives.

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