Ethical investing may seem like the latest fad to hit the investment industry’s shelves. It also carries the stigma of being a lower return investment option with a focus on ‘doing good’ rather than performance.
Faced with these myths, ethical investing could seem like a suboptimal option for not-for-profit (NFP) organisations who rely on limited funding to carry out their missions, but this is not the case.
Ethical investing has existed in the investment industry for many decades, but has only recently become a more mainstream investment style as the world is becoming increasingly environmentally aware.
Like other investment styles, ethical investing’s main focus is performance, but its point of difference is that this isn’t the only focus. Ethical investing is also about the world around us.
It’s here that ethical investors and NFPs have something in common. NFPs are mission-focused and are committed to making the world a better place. Ethical investors hold the same values.
Their mission is to provide performance for their clients while investing in companies and industries that are improving society and the environment.
However, not all ethical investors are the same, and it can be a little confusing looking through all the fine print to find out what is and isn’t ‘ethical’.
Australia’s first dedicated ethical funds manager, UCA Funds Management, has been refining its ethical investment
process for the last 30 years.
Not only does UCA Funds Management screen the investment universe for investments with a positive impact, it also performs negative screening – analysing a company’s products, services and practices to ensure they don’t have a negative effect on society or the environment.
An integrated ethical investment policy governs all investment decisions, and incorporates a comprehensive list of practices and industries excluded from investment as unethical. This includes:
- Armaments
- Gambling
- Tobacco manufacturing
- Thermal coal mining and exports
- Unconventional oil and gas extraction
- Practices causing or perpetuating injustice and suffering
- Unacceptable environmental management practices.
As a social enterprise itself, UCA Funds Management also understands that NFPs need an investment to not only perform for them, but also to support and align with their mission. UCA Funds Management has developed a number of specialist funds designed for charities and faith-based organisations.
Continuing its outward focus, it also gives its operating surplus to The Uniting Church in Australia in support of community services, advocacy programs and mission-based activities.