Funds that take ethical, sustainable and responsible investment approaches may have to meet stricter definitions and be clearer about what they do under rules being considered by the Investment Association (IA), the trade body for asset managers.
The current system does not prescribe definitions for responsible investment strategies, meaning asset managers can label funds and define their process as they see fit. This means that although there are many ethical, sustainable and responsible funds to choose from, as they do not have to meet a set definition it can be hard to compare them to each other.
Ethical investment refers to a myriad of strategies. These include screening out investments based on their environmental, social and governance (ESG) record, investing under ethical guidelines, investing with climate or sustainability screens, and aiming to make a positive impact. However, there is no definition of what constitutes ESG, ethics, or what is meant by responsible or sustainable investing.