What Does Ethical Really Mean For Investors?

Investors are keen to buy in to ethical funds and companies but feel they do not have enough information to make their investment decisions, according to new research.

Around two-thirds of investors want to put money into ethical investments, buy more than half (57%) want to know more about the companies they are taking a stake in.

Around 40% also felt they could not drill down deep enough into details of the shares held by funds so that they could determine whether the holdings met their requirements for ethical investing.

This has sparked an interest by some fund managers and investment advisers for the financial industry to come up with a definition for ‘ethical’.

They suggest more than three-quarters of investors would like to put their money into business that can demonstrate their ethics match their own, but that the definition of ethical varies between funds and companies.

Clear definition needed

This mismatch of terms means many investors never really know what a financial means by ethical when talking about a fund or shares.

John Tracy, of TD Direct Investing Europe said: “The industry needs to come up with a standard definition for ethical.

“Investors want to put their money into these funds and shares but do not really know how ethical they are. They have ideas in their mind about their meaning of ethical and they are often not met by fund managers or companies.

“Having a grey area is not helpful for anyone and the industry need to do something about this to remove the confusion.”

Plunging gilt yields

Gilts are suffering as a financial safe haven as investor cash in on stocks and shares and flee the markets.

Yields have plunged in recent days and one effect is that swap rates on the money markets have dropped as well.

This means borrowing is much cheaper for banks and building societies and could lead to a cut in mortgage interest rates, says Ray Boulger, of mortgage broker John Charcol.

“Few lenders have cut rates as a result in gilt yields and swap rates falling,” he said. “However, we could see rates challenging the lowest ever five year fix of 2.48% that was available to borrowers two years ago.

“The cost of borrowing really has plunged much lower for lenders and borrowers should expect much cheaper fixed rates over the next few weeks”