What is ethical investing?
Over the years many investors have become frustrated that their investments do not take into consideration the environmental impact or corporate behaviour of the underlying companies in the funds. To answer this demand an increasing number of ethically focussed investment funds are now available, that invest only in companies that meet their environmental and socially responsible concerns.
Environmental and socially responsible policies are more central to our everyday lives and so investing according to these principles is becoming more mainstream. The challenge with ethical investing is the detail.
The easiest method to build ethical investments is to simply avoid firms or funds that are active in the sale of arms, or the production of fossil fuels, for example – negative screening.
The flip side of this approach – positive screening – seeks investments that set out to make a difference, for example, renewable energy or technology infrastructure.
The combination of avoiding sectors with poor ethics and supporting those that make positive contributions to the environment and socially responsible practices ensures that investors’ money is being used to only support businesses that are aligned with their outlook for the future.
The benefits of Tatton as your ESG Discretionary Fund Manager
As an institution with over £16.55 billion of assets under management, we can demand full access to each fund manager’s processes to ensure they meet our ethical criteria. Our rigorous due diligence process is a key benefit to provide the reassurance investors require that their money is being invested in line with their principles.
Our aim is to invest in best-in-breed ethical funds that have standards similar to those we aspire to for our portfolios and can also deliver attractive performance to investors. We match the different styles approaches of investment managers from across the world to create and manage an ethical portfolio that will suit investors who are seeking to include Ethical factors within their long-term investments.
ESG Honestly
One of the challenges we face is that there is no industry standard or rulebook as to how ethical criteria are applied. There is considerable overlap in approach but much is based on interpretation, therefore two ‘ethical’ funds can appear to be similar but differ significantly in their approach.
As experienced ESG investment managers, we are able to see through ‘greenwashing’ claims by fund managers and the companies they might invest in. We are also used to managing the inevitable compromises that have to be made to build portfolios that meet investors expectations in an area of investing where investors can have different priorities. For example, some environmental concerns are paramount, whereas others want to exclude damaging human behaviours such as arms sales. All of this has to be done within a global economy that is still wholly dependent on fossil fuels to function. We are open and honest about how we navigate the challenges of meeting our investors objectives within the constraints of a global economy that still needs to change.
Tatton and our investors are part of the force for change, although there is still a long way to go.
Please read our ESG Honestly blog where we discuss the different challenges we navigate to create our Ethical Portfolios.