We show you how to compare ethical OEICs to help you find the best performing OEIC for ethical and green investing.
Ethical OEICs are structured and operate in the same way as standard OEICs (Open Ended Investment Companies).
You can buy shares in an OEIC fund in the same way as any public company. The money generated by share issues is then pooled together and used to trade on the stock market to grow the value of the fund.
Your shares make up your portion of the fund’s overall value, so you can profit from your individual shares increasing in value (capital gains), and through the dividends paid to the fund which are redistributed to investors like you.
The only difference between ethical investment funds and standard OEICs is that ethical funds will only purchase stocks in industries or companies proven to trade ethically. This means your money won’t be invested in companies that trade immorally or irresponsibly.
Which industries are not considered ethical investments?
OEICs have different criteria for companies and industry sectors they consider unethical, although almost all ethical funds avoid the tobacco trade and arms dealing.
Ethical OEIC funds carry out a series of checks on each company and business before they invest so they know they industry areas in which they operate. If a company is found to be involved in “unethical business” an ethical OEIC will be not invest in them.
The industries that ethical funds tend to avoid include:
- Nuclear power
- Animal testing
- Environmental damage
- Support for oppressive regimes
- Child labour
An ethical fund wouldn’t invest in any industry or country that uses or promotes these practices; hence they are known as negative checks.
However, some ethical funds include positive checks in their investment criteria. This means they will only invest in companies that have high standards of community involvement, good employee welfare rights and/or environmental policy.
Ethical and green investing are often seen as independent of each other as a company may be ethical in almost all its practices, yet have a poor environmental track record. Depending on your strength of feeling, you can decide which funds are suitable for you.
How to choose the best Ethical OEIC fund
In order to find the best ethical OEIC fund for your hard earned money, you’ll need to check each fund’s investment objectives and performance against the level of ethical and social responsibility you’re happy with.
Ethical OEICs will usually publish a list of industries they don’t invest in, but another aid to your decision should be the fund manager’s own track record as they have personal responsibility for picking the fund’s investments.
Alongside looking at their personal performance in recent years you can judge their past links and dealings with ethical and/or unethical industries.
When you have narrowed your search to funds that meet your ethical investment criteria, use our table to compare ethical OEIC prices, check individual funds’ performance and find the best OEICs to grow your investment both ethically and responsibly.