You may think you can rest easy when you opt for an ethical investment but how do you know if the advice you are getting is ethical to match? The answer is you don't. There is no accreditation for ethical advisers or watchdog regulation. You have to take their word for it.
The Ethical Investment Research Service which provides data on the sector has compiled a list of 70 ethical advisers. But getting on the list is simple - either 40% of a firm's business must be ethical, they advise on more than £100,000 a year in the sector, or they have simply requested the leaflet "choosing an ethical fund".
Eiris defines an ethical adviser as "somebody with an understanding of the issues. It is nice to see an adviser who has an interest in ethics and can demonstrate it".
It adds: "From a customer's point of view it's better to have a good financial adviser than someone who gets business in by promising to donate money to charity."
Lee Coates, director of the Cheltenham-based Ethical Investors Group, says: "I chose this area because it gave me the opportunity to do what I was interested in and get paid for it at the same time." He and his colleagues have interests ranging from gay rights to the Quaker movement.
Geoff Griffiths, principal of the Salisbury firm Barchester Green Investment, chose his nine advisers for their integrity and track records; a strategy that fellow advisers Holden Meehan also adopts. But London-based Holden Meehan says it has trouble finding people who are professional enough.
Its sales director, Richard Hunter, says: "Our ethos is to be both socially responsible and ethical. We are for city bods with consciences. The trouble is that the ethical movement has not always been 100% professional, but we are committed to it."
Mr Griffiths agrees it is hard to find the right calibre of employee. He says: "It's like trying to find a shy retir ing used car salesman or Bambi in Babylon because you are looking for people who are the exception to the rule and have survived."
He started out advising Anglican clergy from his garden shed in 1985. At that time he was mainly selling Friends Provident Stewardship fund, as it was the only one available. He still recommends it but his biggest sellers these days are the NPI global care funds.
He likes NPI for their "policy of engagement" which means they looks for compa nies that have a green investment strategy as well as good employee relations. The NPI fund comes in income and growth incarnations. The former had growth of 7.2% last year just below the sector average of 7.66%
The NPI funds buy into "companies of the future" which it says are technology and smaller companies. Companies it invests in include Vodaphone and the Body Shop as well as lesser-known names such RM plc which produces computer software for schools.
Mr Griffiths also tips the Jupiter Ecology fund which invests heavily in waste recycling and waste management and the Murray Johnstone ethical world fund for its stringent screening. There are seven criteria including the environment, work place issues, human rights and weapons manufacturing. Its growth to date has been consistently in the top quartile.
Holden Meehan's favourite is Friends Provident, which invests in any company that has the making of a green policy and uses its status as a shareholder to develop it.
The Friends Provident Stewardship fund, its trailblazing ethical fund, has recorded growth of 219.38% over 10 years compared to a sector average of 245.33%. Its biggest holdings are in services.
Holden Meehan also flags the Henderson ethical fund to investors because of its faith in the fund managers.
Mr Coates, who puts his money where his mouth is by giving thousands to charity each year, speaks highly of the Norwich Union UK ethical fund on cost grounds. He says: "It has a large stake in technology and telecoms but is diversified enough not to fall." He also recommends the Murray Johnstone fund.
And like the funds themselves, ethical advisers come in shades of green. Investors wanting a more socially responsible home for their cash should try more than one adviser before deciding.
Alternatively, they can make up their own minds and buy through a discount broker.
