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Title:What are ethical investments?
Date of publishing:September 20, 2011
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Language:English
Also available in the following languages:Dutch, French

What are ethical investments?

Lots of financial institutions offer ethical investment products. Sometimes ‘ethical’ is called ‘sustainable’, ‘green’ or ‘socially responsible’. Whatever the name, all these funds claim not to aim purely for profits, but for “pure” profits. Their aims are so-called extra-financial purposes: a fair, environmentally-friendly, humane ... society.

In practice ‘ethical investments’ seems to be a term that covers many aspects. A product can be called ‘ethical’ based on a variety of criteria.

Forum ETHIBEL finds it important to bring clarity to this situation and therefore a first classification was made, which has now been adopted on an international level. It concerns a classification in four generations, based on the depth and scope of the criteria which are used.

Fourth generation funds are considered fundamentally the most advanced and sustainable funds. Therefore, these are the only funds qualifying for the Ethibel labels. If you want to be absolutely sure about the ethical aspect of your investments, Ethibel PIONEER and Ethibel EXCELLENCE are definitely the right choice.

 

– only negative criteria

Funds of the first generation are built only based on negative criteria: companies which offer specific products or services or operate in specific industries are excluded. This type of fund will, for example, not invest in arms trade or nuclear energy. For these funds there are no requirements in terms of corporate social responsibility (CSR).

These types of funds offer the investor a chance to protest but this formula is less suited to providing a positive stimulus to the corporate world.

 

Second generation – attention for some criteria of corporate social responsibility (CSR)

Funds of the second generation formulate positive criteria: it includes companies which score well, for example, in terms of CO2 emission or which produce alternative energy or are good employers. So attention is paid to corporate social responsibility (CSR) but only in a limited number of domains.

 

Third generation – attention for all criteria of corporate social responsibility (CSR)

Funds of the third generation focus on companies which score well in all domains of corporate social responsibilities. These domains are human capital, human rights, the environment, good governance and social impact.

 

Fourth generation – attention for all domains of corporate social responsibility AND in-depth, multidimensional research

Funds of the fourth generation are different from third generation funds with regard to the quality and method of evaluation. Several stakeholders are involved. Stakeholders are all parties which are involved in the company one way or another: shareholders, employees, trade unions, customers, suppliers, neighbours, sometimes NGOs operating in the field of the environment, peace, ... Therefore, we call them the ‘social shareholders’.

Attention for all aspects of corporate social responsibility in combination with an in-depth, multidimensional and independent investigation makes these funds the most comprehensive ethical funds from the range. These are the only funds qualifying for the Ethibel labels.

 

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