Sunday, January 2, 2011

Ethical Fund

An ethical fund is an investment product that is focused on making investments based on moral as well as financial criteria. The fund manager may follow a negative or a positive screening method, but with most funds operating a negative screen. An example of a negative screen would be if the fund manager excluded from consideration any companies involved in tobacco, alcohol, weapons manufacture, and so-on; the manager would then go about applying a traditional investment strategy in selecting the stocks from the filtered universe of stocks. An example of a positive screening method would be if the manager sought out companies that were actively doing good, e.g. sponsoring charities and development projects, promoting employee involvement in volunteer work, and companies that provided products that are deemed to be 'good'. The most common application is negative screening, with positive screening funds tending to operate more in the ESG space (i.e. considering Environmental, Social, and Governance aspects).

Synonyms: Ethical investment, Socially responsible investment, UNPRI, ESG, Green investment, Sustainable funds

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