As changes in global politics and the economy make financial returns more elusive, and moral and ethical considerations rise in popularity, ethical screening is an established investment strategy. Not only can investors do social good with ethical investment screening, but they can also enjoy sound financial returns. David Smith, our Business Development Manager, explains how ethical investments moved from niche to mainstream.
What is ethical screening?
Ethical screening is the process investment companies use to determine where to invest by checking investments against certain moral standards and either selecting or removing them based on whether they are good or bad stewards of the world. Negative screening is the exclusion of investments deemed to be undesirable. Positive screening actively favours investments expected to benefit people, equality, or the environment. For example, companies with sound corporate governance, environmental or labour policies.
Why look for ethical investments?
An ethical investment strategy considers what your money is funding, and in some cases, not funding. It has a direct impact on people and the planet and can put pressure on companies with a poor record on issues such as child labour, the environment or human rights abuse.
For investors, it is important to clarify what ethical screening is, as it may not align with your values or may exclude things you’re interested in supporting. Make sure to consider, ‘what does ethical really mean?’ and ‘ethical for whom?’ to decide what is right for you.
What does this mean to CCI?
We manage investments in line with the Catholic social teachings of human dignity and social and financial stewardship. We screen investments and exclude any that are involved in armaments, pornography, gambling, abortifacients, contraceptives or tobacco.
We don’t just review a company’s investment strategy. We also screen their objectives, conduct and trade agreements. For example, companies which engage in excluded conduct including child labour, discrimination, corruption and dictatorial regimes, wages and conditions below minimum standards, lack of labour rights relating to work conditions and environmental damage that is not redressed, are screened out. This full Catholic values screening is something no other provider in the market place offers.
Ethical investment screening will keep evolving as markets and values change, but it is largely here to stay.