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Two-thirds of investors may unknowingly hold unethical shares

Kit Klarenberg
Written By:
Kit Klarenberg

The majority of UK investors are unaware which industries their investments are financing, and may be invested in sectors they are morally or ethically opposed to, research has found.

The study by ethical bank Triodos revealed that 63 per cent of investors don’t know whether the activities of the companies or industries they are investing in are ethical, meaning many are potentially funding practices which go against their personal views.

The findings show only a quarter (25 per cent) of people say they know if their investments are ethical.

Investments made through pension funds and stocks and shares ISAs, for example, can lead consumers to inadvertently finance activities they ethically or morally object to. Recent analysis of UK local government pension schemes revealed over 4 million civil servants had £14bn invested in fossil fuel companies.

The figures suggest 85 per cent of investors would act if they felt their investments conflicted with their personal ethical preferences. Respondents were asked to highlight practices which would deter them from investing in a particular company, fund or pension. The top five are:

  1. Human trafficking (70 per cent)
  2. Forced / child labour (67 per cent)
  3. Pornography (49 per cent)
  4. Animal testing (45 per cent)
  5. Arms / munitions (41 per cent)

The research also highlighted a pronounced appetite for ethical investment, with 71 per cent of investors saying they wanted more of their pensions and investments to be in environmental and social sectors.

Almost half (46 per cent) would like more of their pension or investment products to be invested in renewable energy, while 43 per cent would like to invest in healthcare and 37 per cent in sustainable businesses.

Huw Davies, head of personal banking at Triodos Bank, said: “The results show people do care about the activities their pensions and investments are financing, and would be willing to act if these clashed with their principles. But with almost two-thirds oblivious to where their money is being invested, millions run the risk of inadvertently investing in areas which contradict their personal ethical preferences.

“At the same time investors are willing to support more sustainable activity, but are likely to be missing out unless they’ve taken active steps to do so such as investing in SRI funds. A big part of the problem is the lack of transparency in financial products – it should be much easier for the average investor to find out which companies and activities their money is financing so they can make informed decisions.

“Individual investors can make a difference by taking a look under the bonnet of their pensions and investments, and doing something about it if they’re not happy with what they discover.”