Author: Peter Cantelon, Executive Director
What a loaded title. Especially when being written by an organization like Jubilee Fund that focuses on ethical investment and social finance. You would expect us to say yes and you would be right but we want to make sure you understand why.
To that end let’s take a look at a few reasons why ethical investment is the way of the future.
Let’s get a few things out of the way first. Ethical investment exists on a spectrum. One cannot look into the world of finance and divide things neatly into two camps – ethical investments on one side and unethical investments on the other.
An ethical investment depends on your ethics, or your culture/society’s ethics. What is an ethical investment? One person might say it is investment in greener power solutions like hydroelectric rather than fossil fuels. This sounds right. Then another says “but what about the valley that was flooded for the hydroelectric dam built on my ancestral land without my permission?” and we must pause.
Ethical investment is not as simple as we might wish. Still, we should not lose hope. We need to look at ethical investment as a broad movement or shift toward investments reflecting changing cultural morés or values.
This means that ethical investment and its future is dependent on these values continuing to shift away from things that contribute to harm (weapons industry, fossil fuels, etc.) and toward more sustainable, helpful solutions (poverty reduction, sustainability, green power, agricultural innovation etc.).
One of the drivers of ethical investment is the United Nations and its 17 sustainable development goals (SDGs). The SDGs were adopted in 2015 with the intent of having them met by 2030. They range from Zero Poverty, through Quality Education, Gender Equality, to Climate Action and more.
The goals are a visible sign of a changing world and have become objectives whereby some funds and investment opportunities (as well as corporations) are measuring themselves. They are becoming an ethical framework for sustainable investment.
Recently the CFA Institute wrote:
“Although the future of sustainable investing includes many unknowns, we advance three important tenets where sustainable investing goes further than its forerunners:
It is additive to investment theory and does not mean a rejection of foundational concepts.
It develops deeper insights about how value will be created going forward using environmental, social, and governance (ESG) considerations.
It considers many stakeholders.”
In translation they are saying that sustainable investment is a more nuanced, thorough and insightful form of investment that adds to the current investment space and does not detract.
What does this tell us about the future of ethical investment? It tells us that investment momentum is toward and ethical and sustainable framework. It tells us that ethical investment practices and measures are currently being woven into the broader decision-making framework for investment.
With these things in mind, we are confident in saying that ethical investment is only going to grow and strengthen in the future and this bodes well for all of us.