Today, a growing number of investment funds specialise in socially responsible investing. But products advertised as socially responsible are diverse and varying, with opinions differing on which industries are ethical and which industries should be excluded.
PensionBee offers two pension plans that make exclusions based on different socially responsible criteria: the Climate Plan and the Shariah Plan.
Examples of socially responsible investing
There are two ways of looking at socially responsible investing; through the way companies operate and the industries they operate within.
The way companies operate
The way a company operates will determine whether some investors consider them to be socially responsible. The types of company practises worthy of a socially responsible investment fund’s investment may include:
- high employee welfare standards;
- high consumer protection standards;
- adequate board/senior-executive race and gender diversity; and
- ethical supply chain partners (eg. factories that provide suitable working conditions).
Industries companies operate within
As well as examining whether a company is deemed a socially responsible investment, funds may exclude companies automatically based on the industry they operate within. These may include:
❌ gambling;
❌ firearms;
❌ tobacco;
❌ alcohol;
❌ fossil fuels; and
❌ adult industries.
But while many investors and funds avoid certain types of companies, others proactively seek to invest in companies that are committed to working towards furthering society in a responsible manner. These types of companies might include:
- clean technology;
- environmental sustainability;
- social justice;
- education; and
- accessible healthcare.
Types of socially responsible investment funds
To cater for the broad range of values and goals held by investors, investment funds approach socially responsible investing in a variety of ways. All approaches seek to make a positive financial return. And academic studies have found that more sustainable investing can lead to higher returns.
Some simply exclude companies that don’t meet a certain set of criteria (such as board diversity), while others have a narrower investment strategy (such as only investing in Shariah-compliant companies).
Socially responsible pensions
When saving into a pension, you can choose a pension fund that aligns with your values as well as your long-term goals.
PensionBee provides two socially responsible pension plans:
Climate Plan: The plan invests in more than 800 publicly listed companies globally that are actively reducing their carbon emissions and leading the transition to a low-carbon economy.
Shariah Plan: Invests your money only into Shariah-compliant companies. Investments are approved by an independent Shariah committee.
For more information, read: ESG investing and its impact on pensions.
Risk warning
As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.
Last edited: 05-12-2024
