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What is ethical investing?

Over the last few years we have seen a substantial growth in the popularity of investment strategies such as ethical investing (otherwise known as socially responsible investing) but are the returns in the same league as non-ethical investment?

It is worth reminding ourselves what the term ethical investing actually relates to and the restrictions this can have on your investment decisions. In essence ethical investing is dictated by a number of guidelines which may include non-investment in defence companies, tobacco companies, gambling or other such sectors which may attract controversial opinions from the investment population. These are just a small selection of possible exclusions and ethical investing literally differs from investment manager to investment manager or individual investors.

Once the ethical guidelines have been crystallised then any investments need to adhere to these guidelines in addition to making purely financial decisions on specific companies and sectors. While there has been a substantial increase in ethical investing there is some confusion as to whether it actually attracts greater investment returns than more traditional widespread investment guidelines and the jury is still out.

However, whether you invest using ethical guidelines or not there has been great pressure on companies to release their ethical ideals on which their decisions are based - this is a very useful side-effect of the ethical investing trend.

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