The Evolution of Ethical Investing

Ethical Investing dates back thousands of years and to this day is associated with investing based on one’s individual values. The market for investing for good has evolved and now incorporates ESG and Impact as well.

History of Ethical Investing

Ethical Investing dates back thousands of years and to this day is associated with investing based on one’s individual values. Whilst it can be at times associated with only adding a negative screen to the investment process, it is in fact much more and can include a positive inclusion. So whilst screening out the ‘evils’, such as oil, gas, coal, poor governance and tobacco, we implement a positive inclusion, which by its very nature finances solutions to social and environmental issues. All of which comes on top of the standard investment criteria.

Our sole interest is creating portfolios which reflect clients’ personal values, meaning we can take the above concept and invest in issues that are close to our client’s hearts, whilst also seeking positive returns over the long term.

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Terminology Buster

As investing with a set of personal principals moves into the mainstream, different approaches and terminology have developed, which at times can be confusing. This video goes through some of the key terminology, such as ethical, ESG and Impact, and other industry jargon that’s often used in the context of responsible investing.

Know Your Ethical Client

Values based investing means managing portfolios to two instead of one set of criteria. The investment criteria is straightforward, and is no different to conventional investing. The Ethical criteria takes on a more ‘human’ approach, as past experience has taught us that ethical investors are more concerned where their funds are invested. This means it is vital to ensure that the investments match the client’s values, and the only way to ensure this is done, is by getting to know your client’s ethics, in what we call KYEC, or Know Your Ethical Client.

Our Screening Process

At King & Shaxson Asset Management, we take your clients’ values and reflect it in their investment portfolio. Our 20 years of experience means we understand the importance of a thorough screen.

We utilise both a negative and positive screening process to filter out the harmful and include the positive. These screens take a slightly different shape for our models compared to bespoke: with bespoke it is formed with respect to a client’s values-based questionnaire, whilst the screen in place for model portfolios is laid out in the documentation.

The method we use to screen investments includes both a process driven quantitative and values-based qualitative approach. This is because whilst quantitative ESG data is an important part of screening a company or fund, it is necessary to look beyond just data and take into account other sources of information.

ESG analysis is integrated into the investment process to avoid risks based on environmental, social or governance factors. On top of this, investments are sought which provide solutions to many of the challenges we face, which is categorised as sustainable or impact investing. Our portfolios cut across the spectrum of responsible investing.

Positive Investment Themes – Impact Investing

The United Nation’s Sustainable Development Goals (UN SDGs) have provided an important framework to deliver a number of sustainable outcomes for people and the planet, with the aim to achieve overall prosperity for all. A number of the seventeen goals (highlighted in the framework to the left) and their 169 underlying targets have been adopted by the investment universe to direct capital to create positive change.

Because of the positive screens in place, portfolios provide solutions to a number of the sustainability challenges highlighted, from climate change to access to affordable healthcare. For ease of reporting to our clients, we have constructed 9 investment sectors which run through portfolios, with obvious similarities and overlaps to the UN SDGs. We do not manage this as a thematic portfolio, the themes just help explain our combined ESG, Impact and investment approach. These can be found below: