Another way of considering ethical investment is by using the ‘green scale’, which effectively measures a level of commitment to ethics and social responsibility. The green scale is commonly used to demonstrate the ethical credentials of a fund or company, but is essentially akin to the screening approach:
- ‘Dark-green’ investing aims to avoid all companies in certain sectors, such as arms, tobacco and fossil fuels, while also proactively investing in companies that make a positive contribution to the environment or society;
- By contrast, a ‘light-green’ fund might invest right across the stock market, but only in those companies working to improve their ethical performances.
Using one’s ethical principles as the main filter for securities selection. Ethical investing depends on an investor’s views; some may choose to eliminate certain industries entirely (such as gambling, alcohol, or firearms) or to over-allocate to industries that meet the individual’s ethical guidelines.