Socially Responsible Investing


Martyn Percival

Martyn Percival

Financial Planner


Socially Responsible Investing (SRI) has come to prominence in recent years as investors seek to invest in companies that are either delivering social good or trying to change poor/unethical behaviours.

There are two types of investment screening when considering SRI. The first type of screening is negative screening. This is where investors may have a preference to avoid certain investment types such as tobacco or alcohol producing firms.

Positive screening is the second type of screening used when considering SRI. In this case, investors are looking to invest in companies that are changing “bad habits” e.g. a company trying to use more environmentally friendly/sustainable resources or raw materials than they have done in the past.

An example of a positively screened company is a large blue chip company. In 2009, the company took the decision to commit to a goal of sourcing 100% of the palm oil they use in their products sustainably. However, it can also be seen as a negatively screened company for its continued use of palm oil.

After establishing whether an investor will use positive or negative screening, the next step is to establish how ‘green’ their views are.

Consider this – you have decided that you do not want invest in tobacco stocks; would you invest in supermarkets given that they sell tobacco products?

If you answer the above question “yes” your stance would be seen as ‘light green’ – you would avoid direct exposure to tobacco stocks. If you answer the question “no”, then you would be considered ‘dark green’ and you would seek to avoid direct and indirect exposure to tobacco companies.

As ethical investments avoid traditional defensive stocks, such as tobacco, there is potential that ethical funds will be slightly more volatile than a fund that has no investment constraints in a falling market. However, as investors become more socially conscious this trend may soften in the fullness of time.

To find out more about how socially responsible investing could work for you, or if you would like to review your existing portfolio, please contact a member of our Wealth Team by email on enquiries@jcwealth.co.uk or your usual local office Financial Planner.

The value of unit linked investments is not guaranteed and you may not get back the full amount invested. 

Nothing in this blog constitutes advice to undertake a transaction and professional advice.

Disclaimer: While all possible care is taken in the completion of this blog, no responsibility for loss occasioned by any person acting or refraining from action as a result of the information contained in this blog.

Johnston Carmichael Wealth Limited is authorised and regulated by the Financial Conduct Authority