Did you start the new decade with a pledge to finally get to grips with investing? With a majority Conservative government in place and Brexit on the horizon, 2020 may be the moment that you finally start a long-term investment plan.
But as soon as you search Google for ‘beginning investing’, you will come across baffling jargon. Terms such as robo-advisers, trackers and SIPPS have nothing to do with robots, fitness or drinking. Even the firm that I work for, and which is the parent company of Moneywise, is an investment platform, which has nothing to do with railway stations.
It is not an easy language to learn. And if you want to invest your money in line with your principles, you will come across an alphabet soup of terminology.
Last year was when everyone finally woke up to the impact of climate change, and I see no reason for this to change in 2020.
The well-documented climate emergency, and scourge of plastic waste highlighted in awareness campaigns and documentary series, such as David Attenborough’s Blue Planet II, have helped to thrust the environmental issue up the political agenda and into the public consciousness.
However, 40% of investors* find the terminology around ethical investing complex – which is likely to be a significant factor as to why only 23% say they invest in ethical funds.
Nevertheless, some investors are flocking to investments that offer not only a sustainable return for investors but, more importantly, a sustainable future for the planet. Even my own children are showing an interest in where their Junior ISAs are invested and how that contributes to saving the planet. Everyone’s idea of ethical investing will be different so you will have to be prepared to do some research.
The Investment Association, which represents the UK funds industry, has designed new industry-wide definitions to clarify the complexities of sustainable and responsible investment.
It is a great start. But it was no easy task getting an entire investment funds industry to agree on a common framework to help navigate the complex world of responsible investment, and many investors will be unable to speak the new common language. It includes phrases like ‘positive tilt’, ‘sustainability themed’, ‘private impact investing’, ‘SDG Funds’ and ‘norms’, which seem to me classic ethical alphabet soup – albeit sustainably sourced.
By contrast, interactive investor has collected 140 ethical investing funds together into a long list and divided them into just three categories to help you get started. We had help from the Moneywise team to do this.
Our categories are called ‘Avoids, Considers, Embraces’ – an approach deliberately designed to be consumer friendly. This is what the terms mean:
The top 10 list of investors’ favourite ethical investments on the interactive investor platform is dominated by the funds in the Embraces category. Some of the investments are sector specific, with clear ethical criteria, including investments in infrastructure, wind, health, solar and clean energy.
The most bought ethical options in 2019 on the interactive investor platform were:
But even with our list, there are lots of questions to ask as we haven’t completely ruled out the complexity or the jargon.
Please get in touch with Moneywise or myself if you have a question about ethical investing. We can guarantee that we won’t call it stupid.
Moira O’Neill is head of personal finance at Moneywise’s parent company interactive investor
Moira.oneill@ii.co.uk
*558 interactive investor website visitors completed the poll from 22-24 August 2019.
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