Responsible investing
A healthier approach to wealth
Every company has an impact on the world around us. And by investing in them, so do we.
Responsible investing recognises this fact. It picks investments based on principles as well as profits, weighing up the costs your portfolio won’t show – those paid by people, society, and the planet.
For a long time, this approach was considered more admirable than profitable. But not any more. The number of responsible funds is growing apace, and so too is evidence that they can actually post superior returns.
Why responsible can be profitable
It’s a common misconception that investing responsibly means accepting lower returns. The argument goes that since responsible portfolios exclude sectors such as tobacco – which are unethical, but profitable – they can’t hope to match non-responsible portfolios for performance.
Increasingly, though, evidence says otherwise. A responsible investor may have a reduced pool of investments to choose from, but they’re also less likely to invest in companies that suffer stock-price hits from scandals or fines. Similarly, responsible companies typically have more sustainable business models, and are better positioned to adapt to long-term challenges, such as climate change.
How do I invest responsibly?
There’s no single, universal way to be a responsible investor. What is and isn’t ‘responsible’ varies from investor to investor. A company one person considers ethical might be considered harmful by another – and vice versa. So firstly, it depends on your principles, and what you’re happy having in your portfolio.
It also depends on your approach to investing. Building your portfolio from shares rather than funds gives you more control over where your money goes, but involves more research. Conversely, choosing a responsible fund saves you time, but also means handing over the reins to a fund manager.
Fund manager researches responsible companies for you
Wide diversification – in one investment
Large and increasing number of responsible funds to choose from
Not every investment the fund includes may fit your values
Responsible funds typically have higher charges
More control over what goes into your portfolio
Different strategies you can follow, depending on how responsible you want to be
Checking a company's environmental, social and governance (ESG) credentials takes extra time
Have to invest widely to ensure your eggs aren’t in one basket
Investing for the greater good can be healthy for your pocket, not just the planet. Our free guide explains how.
Read guideHow we can help
Want to keep your footprint low – without the legwork? Managed by us for you, the AJ Bell Responsible Growth fund is the effort-free way to invest in companies that care about more than just profit.
Choosing the right fund can take work – but we've done the bulk of it for you. The AJ Bell Favourite funds list is our specialists’ pick of funds across a wide range of sectors, including ethical and sustainable.
You can easily check each fund's Morningstar Sustainability Rating to determine its ESG credentials. And every investment has its own comprehensive research page.
Keep up with the latest developments
Responsible investing has gone from the margins to the mainstream. The articles and analysis below can help you keep up with the latest in this fast-moving field.
Excluding the sinners, rewarding the winners – how we build our Responsible Growth fund
Wed, 11/11/2020 - 16:07
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