Former Niko Fiti brand ambassador Esther Ingolo (right) with Mombasa
County officials during a past corporate social responsibility campaign
in support of persons with disabilities. PHOTO | CORRESPONDENT
By CATHY MPUTHIA
An ethical investment fund uses moral principles to
choose what stocks to invest in by eliminating what is considered to be
unethical such as investment in alcoholic beverages while focusing on
what is seen as decent such as green energy.
The ethical fund is commonly used by religious practitioners
or other institutions with strong moral background and may only invest
in firms with strong ethical values.
Such a fund considers the ethical policies of the
companies it wishes to invest in and seeks information as to their
policies and risk factors.
Therefore, to attract an ethical fund or investor, you need to be very clear on your moral principles.
These should be set out in the vision and mission
as well as the values of the company. An ethical investor would want to
know what your moral foundations are or what reputable business you
support. A good example is a company that promotes clean energy. Green
funds invest in only “green” companies.
As an ethical investor, you should also consider
the corporate social responsibility (CSR) indicators in stocks you seek
to invest in, such as their environmental, social and governance
principles.
An ethical investor does not invest in companies
that have bad governance practices such as corruption. They instead use
their influence to invest in firms with sound practices such as
environment conservation and avoid those engaged in pollution.
A company with good human resource policies also attracts an ethical investor.
Where do you start out as an ethical investor?
First, get information from the companies in terms of policies and CSR
allocations.
An ethical fund uses such information to assist it
in preparation of the prospectus for clients who wish to be part of the
fund. You should look at the company’s commitment to ethical practices,
its track record, impact on the community and returns.
The information will help you make a good
investment decision. Remember at the end of the day, other than
promoting your ethical values through investment, you are also looking
to make a good return from the company.
The CSR has no clear-cut definition, but is
determined by the corporate interests and it is self-regulated — for
example, in the CSR department policies. It is also voluntary.
The CSR involves several stakeholders such as
employees and the community. Therefore, it involves a wide range of
interests other than those of the shareholders.
The CSR should align the social and economic goals
of a company without conflicting with the firm’s profitability and
economic performance.
Firms should benefit economically from the CSR,
which is about practices and values that are determined by personal
values of the managers as they formulate the policies.
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