How can I create a policy for the conscious investor?

Investors use an ethical investment code to align financial investments with personal or corporate moral beliefs. For example, a health charity may choose to have an ethical investment policy that disallows any investment in companies or funds where returns are generated from tobacco production or sales.

Investment in socially responsible funds is a growing business in the financial markets, with the Social Investment Forum reporting that between 1995 and 2007, these funds invested nearly US$3 trillion. Responsible investing should be part of a corporate social responsibility initiative for major investment houses to offer, or at the very least, some alternatives to regular funds.

Determining Ethical Investment Priorities

Organisations wishing to implement said policy should start by determining the organisation’s moral investment priorities. Two major ways to determine the framework of an ethical investment policy are positive screening and negative screening.

In a recent survey conducted by CFDG and EIRIS of charities, over 85% of respondents used negative screening as a tool to determine ethical investment options.

Negative Screening — Avoids Association With Companies or Issues

Negative screening is the process of analysing and assessing the behaviours, products, and community engagement of potential investment vehicles, whether they are companies, industries, or mutual funds. Organisations implementing ethical investment policies based on negative screening consider the impacts of the possible investment vehicle across a range of corporate outcomes. A short checklist of issues to consider when implementing a negative screening approach includes:

Determining ethical investment priorities is a highly personal process; each ethical investment policy will contain different determinations and guidelines for investment. For example, Company A may oppose tobacco but not against animal testing…

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