It doesn’t bode well when you see ethical specialists debating online what ESG, sustainability and a whole host of other ethical investment related terms are. Yet, it happens. And it happens pretty frequently.
Just this week, I attended a webinar to listen to what retail investors had to say about ESG. Overall it was incredibly supportive of the ethical investment environment but it did make me chuckle when I saw that I disagreed with some of the terminology being used. Personally, I do not believe that Ethical Investing is synonymous with Negative Screening, but yet here I was listening to an investment professional say it was. Nice and confusing right?
If us so called ‘specialists’ can’t agree, how an earth could our investors understand?
This has been the issue in ethical investing for as long as I can remember. What I have concluded over the past five years is that ethical investing seems to mean something different to each investor – including us experts.
Here at Virtuvest we deem ethical investing to be wide-reaching:
"Ethical Investing encompasses a wide range of approaches (like ESG, negative screening, impact investing etc.), but ultimately is the aim of doing some good via investment allocation.
However, we acknowledge that just because another specialist deems ethical investing to be something more granular doesn’t mean they are wrong. While there does need to be some overall agreement about terms, we recognise that ethical investing doesn’t fit into one mould. Whether standardisation across terminology is required is another debate (and certainly a blog for another day), however, can we really expect ethical investing to mean the same thing to everyone when ethical investing can be so personal? What one person deems as ethical, another person would not.
With that said, there are a number of phrases and approaches which have been accepted by a multitude of investors over recent years. The phrases ‘negative screening’, ‘impact investing’, ‘sustainability’ and many many more exist and are used relatively consistently.
To simplify matters, we have compiled a summary of this terminology on this website – this is a great place to start for those getting to grips with ethical investing. For those reading who helped coin the terms, there will be plenty of opportunity over the coming months for debate on each approach to ethical investing – we will be hosting a variety of roundtables and webinars on this topic and others.
What we are certain of is Ethical Investing is an evolving space, far from its maturity. As it grows, we are going to encounter disagreement, debate and confusion. That’s a good thing, it means people are taking notice and forming their own opinions. For now, we maintain that ethical investing is a catch-all term for the consideration of morals within an investment strategy.
Of course, you are welcome to join the debate as we all continue to progress.