Source: Wealth Creator Magazine January/February 2006

Sustained growth in the ethical investment sector suggests that genuine ethical investment can flourish to the benefit of investors, society and the environment. Ethical investment funds have performed as well or better than conventional funds over considerable periods of time.

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Shares Ethics - Sharing Responsibility

Source: Wealth Creator Magazine January/February 2006

Shares ethics, sharing responsibility.

Over half of Australia’s adult population own shares either directly or through managed funds or superannuation. Many of those investors are seeking out investments that reflect their own ethics and values.

Ethical investment can take varied forms. Many ethical fund managers use negative screening, which means avoiding investments in companies that deal in what may be perceived as harmful activities such as gambling, weapons manufacture and animal exploitation.

Best of sector

Other ethical fund managers might use a best of sector approach, which involves investing in leading firms in every business sector based on their environmental and social performance.

More progressive ethical fund managers use positive screening in addition to negative screening. This involves going beyond avoidance of harmful investments to actively seeking investments that have a positive influence on society. Such investments are often in areas like renewable energy, recycling, health care and education.

Investors should consider the benefits of a professionally managed portfolio as a whole, backed up by extensive experience and resources in corporate ethics research. Companies such as Envirozel, Ceramic Fuel Cells Ltd, and Fisher and Paykel Health Corporation are typical of the type of companies commonly identified through a positive screening process.

Envirozel’s activities are focused on the efficient use of water. Their activities include the manufacture of roof drainage systems that promote water re-use, and the promotion of membrane-based water treatment systems for effluent and runoff.

  • Ceramic Fuel Cells are developing fuel cells that can be powered with natural gas, hydrogen or renewable fuels such as ethanol. Ceramic Fuel Cells is currently focused on developing domestic power units to simultaneously generate electricity and heat water.
  • The Fisher and Paykel Healthcare Corporation designs, manufactures and markets a range of products to assist patients with breathing difficulties, as well as devices for the treatment of obstructive sleep apnoea. The company also manufactures thermal management systems and neonatal intensive care units for new-born and premature babies.

Genuine investments

Sustained growth in the ethical investment sector suggests that genuine ethical investment can flourish to the benefit of investors, society and the environment. Ethical investment funds have performed as well or better than conventional funds over considerable periods of time. The results of the Australian Ethical Balanced Trust, recent winner of the prestigious Standard and Poor’s award for the best performing Balanced Fund - Neutral category, shows that such funds can deliver superior performance.

Among other things, ethical screening can reduce investment risk and identify growth sectors that conventional funds may overlook. It avoids companies that are likely to have serious health, safety or future environmental problems leading to fines, penalties and compensation payouts.

The ethical investment sector is a small portion of the overall market in managed funds, with less than 1% invested using the varying methodologies. Still, the rate of growth in ethical investment is significantly faster than the overall market. Investment in ethical funds grew by 70% in the year ending 30 June 2005 to $7.67 billion.

Investor choice can make significant and positive changes to our economic and social system. By investing with a conscience, ethical investors have shown how the right investments contribute to society and their wallets.

Disclaimer
Past performance is not a reliable indicator of future performance. Any investment related information contained in this article has been prepared without taking into account your objectives, financial situation or needs. Before acting on it, consider its appropriateness to your circumstances. Units in the Australian Ethical Trusts are offered and issued by Australian Ethical Investment Ltd ABN 47 003 188 930, AFSL 229949. A product disclosure statement is available from our website www.austethical.com.au or by calling 1800 021 227 and should be considered before deciding whether to acquire, or continue to hold, units in the trusts.

 

Written by:

James Thier is an Executive Director of Australian Ethical Investment Ltd and a Director of its wholly owned subsidiary, Australian Ethical Superannuation Pty Ltd – a public offer fund. A founding board member of the Ethical Investment Association and is also a director of the Centre for Australian Ethical Research .