Investing ethically, including socially responsible investing (SRI), is on the rise as investors become more aware of the impact of their investments, and this is being reflected in the increase in both the size and number of funds available that claim to be acting with this strategy.

However there remains the possibility that some funds may be investing in stocks that you or me might not define as particularly ethical.  Adviser Workstation contains complete fund holdings, so we can lift the lid on funds and discover exactly what industries and companies are being held.

In the following example, I have run a search that filters by funds that have informed Morningstar they have an environmental, social and/or corporate governance (ESG) strategy.  I then included a filter to remove any of those funds that had exposure to the tobacco industry, and found a drastic number were removed.

ESG search example

There are a variety of reasons why a fund might claim to have an ESG strategy, though still hold shares in tobacco companies, though what this example demonstrates is that greater visibility on this issue is needed.

It is possible to create your own custom ethical search by including a set of filters that exclude industry types, e.g. tobacco = 0, gambling = 0 and so on, as illustrated in the following example:

Custom ethical search example

In addition to the above, there is now one more tool available to advisers and investors, the Morningstar Sustainability rating, more details of which can be found here.

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