Info not readily available for ethical investors
Although almost two-thirds of UK investors want to invest ethically in the next few years, TD Direct Investing claims not enough information is readily available for them to make an informed decision.
A survey of investors by the investment platform found that 64% plan to invest ethically in the near to mid future, but 57% need more information about the performance of ethical stocks before they commit, and 42% find it difficult to find information about specific funds.
Also, although they claim an increased interest in ethical investing, only 6% of ethical investors have specifically avoided the oil and gas industry despite its strong environmental impact.
This suggests that financial considerations sometimes outweigh the moral motivations for investing, even in self-described ethical investors.
About two out of five people surveyed said their ethical investments result in lower returns. However some said they are still willing to go ahead with their ethical investments even if it does mean taking a financial hit.
Ethical or socially responsible investing is becoming more mainstream, with some institutional investors beginning to shun companies with poor governance or social records.
John Tracy, head of TD Direct Investing Europe, has called for a more 'fine-tuned' definition of ethical investing, saying there is still uncertainty surrounding what ethical investing actually means.
"There is a paradigm shift in the UK, with investors wanting to know more about the performance of ethical funds, but also wanting the ethics of the business in which they invest to reflect their own."
Tracy's claim coincides with the publication of research from The Share Centre that found although seven out of 10 investors would want to voice their opinions on unethical company activity - including child labour, tax evasion or animal testing - almost 80% said they don't know how to go about raising concerns, and only a fifth said they know their shareholder rights.
Tracy adds: "The industry needs to be clearer about the definition of ethical investing and the funds themselves should provide more detailed information about their investments."
The number of trades made by TD Direct Investing customers in ethical funds has grown by 84% in the past year, and 94% of its ethical funds have increased in value over the same period, by as much as 17%.
This article was written for our sister website Money Observer
Socially responsible investing
An investment strategy that seeks to maximise both financial return and social good. In general, socially responsible investors favour corporate practices that promote environmental stewardship, consumer protection, human rights, and diversity. Some (but not all) avoid businesses involved in alcohol, tobacco, gambling, weapons, and the military. Ethical investment reduces the number of shares, securities or funds available to the investor and it tends to increase the volatility of a portfolio and therefore the risk profile. Also, because of the time-consuming ethical screening, ethical funds charge slightly higher fees.