Ethical Investment

A concern shared by many of L&P Investment Services' clients is that their investments should be in harmony with the principles and stated mission of their charity, trust, not-for-profit organisation or religious congregation.

A wide range of "Ethical Investment" products and funds have been structured to appeal to trustees with such concerns. However, it can be difficult for our clients to find products which are both compatible with the ethos of their organisations and attractive from a financial viewpoint.

How L&P Can Help

L&P has developed tailored ethical solutions for clients seeking to balance the need for an investment return with the aspiration to make a positive contribution to the world. L&P works with clients to define and articulate an Ethical Investment Policy which is:

  1. in keeping with the ethos of the client organisation;
  2. a workable framework within which financial objectives as well as ethical standards can be met; and
  3. a useful tool for communicating the organisation's ethos to investment managers and for assessing their ongoing observance of that ethos.

Why Should You have an Ethical Investment Policy?

The benefits of an Ethical Investment Policy are clear. A large body of evidence shows that ethical investment has had a positive impact on the activities of a significant number of companies around the world. The need to meet the standards of ethical investors has led these companies to improve the environment and quality of life of many people working for them, particularly in the developing world.

An Ethical Investment Policy also ensures that Trustees do not unintentionally support companies whose activities are diametrically opposed to the ethos of their own organisation. Many Charities have found that while working hard to achieve their charitable goals, they are also inadvertently (through their investment portfolios) supporting companies that operate in a manner not in keeping with those goals. Some Charities have found the revelation of such an inconsistency both damaging to the reputation of the Charity or Trustees and distressful to the Members and / or Donors.

What is an Ethical Investment Policy?

An Ethical Investment Policy is a set of guidelines which determine the ethical criteria which all investments must meet. For example, Trustees can choose to exclude investments in companies that produce weapons or tobacco, while promoting investments in companies that have strong records in the protection of the environment and human rights.

Generally, one of two methods is used in selecting investments:

  • Negative Screening: excludes investment in companies which contravene certain ethical standards; or
  • Positive Screening: directs investment towards companies or sectors which demonstrate high ethical standards in their operations and / or have a beneficial effect on society.

Positive Screening

While Positive Screening is the more progressive and flexible approach, it is also more difficult to implement and requires a clearly-defined Ethical Investment Policy to guide in selecting appropriate investments.

L&P uses Positive Screening, where possible, to select investments in keeping with the specific Ethical Investment Policy of each client. Our aim is to achieve positive financial returns while investing only in companies that have a positive impact on society.

Examples of such investments are:

  • An investment fund focused on early-stage renewable technology firms (environmental benefit)
  • A micro-finance fund, providing loans to small business in the developing world (socio-economic benefits)

L&P clients can rest assured that we will continually balance their need to generate satisfactory financial returns with their desire to observe the fundamental principles of their organisation.