If you wouldn’t buy a product that has been tested on animals, produced using child labour or manufactured in a country known for human rights violations, you can comfortably call yourself an “ethical consumer”.

Ethical consumerism is not just for bangle-wearing, over-zealous free spirits; it’s for anyone concerned about the environment, worker exploitation or the future of developing countries. In practice, it can be as simple as checking for a fairtrade stamp on a packet of coffee. Today, many people are proud to be discerning and responsible about where they spend their money.

So why are these principles so often ignored when purchasing financial products? Your mortgage, your investments and your pension could be viewed in similar terms to products in the supermarket or on the high street, but often they’re not.

Pension funds
You could be surprised to discover where the money you are squirreling away for retirement is being invested on your behalf. For example, millions of euro of Irish taxpayers’ money is involved in the National Pensions Reserve Fund of Ireland (NPRF), which was established to support public sector pensions from 2025. Founded in 2001, the NPRF has invested in several hundred different funds, including tobacco and munitions industries.

In 2006, in an attempt to address the issue of responsible investment, the NPRF signed up to the United Nations Principles for Responsible Investment Scheme. Since then, the NPRF has stated that “the Fund will act primarily through engaging with companies and through exercising its voting rights across as many investee companies and markets as is practicable”. In practice, this means it does not adopt a strict policy of withholding investment from morally dubious companies, preferring instead to use its votes to try to encourage responsible conduct.

If you want to explore your ethical pension options, you can do so through EIRIS (Experts in Responsible Investment Solutions), which is an independent, non-profit organisation and a global provider of research into environmental, social and governance (ESG) performance.

As EIRIS notes on its website: “Climate change, which may destroy 5-20% of GDP, and the widespread losses caused by the credit crunch have highlighted to many pension funds how failures in foresight or governance and social or environmental problems can damage value, both long and short term.”

EIRIS can help you to assess portfolios on more than 3,000 companies worldwide, applying 150 ethical criteria.

Investment funds
There are several options open to the Irish consumer for ethical investment funds. Brendan Burgess, founder of Askaboutmoney.com, notes that three of the most transparent ethical funds are:
• The Dolmen Butler Briscoe Green Effects Fund
• The EBS Indexed Ethical Global Equity Fund
• Bank of Ireland/New Ireland Smart Funds Ethical Equity Fund

The FTSE4Good index series has also been set up to provide investors with information on ESG performance options.

Sustainable banking
The world of ethical finance is vast – and not as niche as you might think. Triodos Bank, which was named 2009 Sustainable Bank of the Year by the Financial Times, was established more than 20 years ago. The Netherlands-founded bank recently held a seminar on ethical banking in Dublin, where it called for a review of the banking ethos that, in its view, helped to create the global recession.

The Financial Times praised the bank for its steady performance, adding that “Triodos has demonstrated the model’s potential, with average annual growth of 20 per cent in the past 10 years, 25 per cent growth in 2008 and €3.7 billion under management.”

While the bank does not offer personal banking services in Ireland, it does lend in the Republic, with a particular focus on sustainable, community-based projects that are in keeping with its socially responsible philosophy.

Other Financial Times “ethical” winners include Standard Chartered (UK), Itau Unibanco (Brazil), Equity Bank (Kenya), Industrial Bank (China) and the Industrial Development Bank of Turkey (TSKB).

Problems with ethical investing
The problems involved with ethical investments largely hang on the question: “What is ethical?” The term, when referring to financial conduct as with anything else, is subjective. Definitions can be flexible and, accordingly, individual customers may personally disapprove of some funds that claim to be socially responsible; so if you’re considering investing, it’s worth doing your homework.

It’s easy to pick holes in sustainable finance. It’s been pointed out as strange that Ireland, a neutral country with a workplace smoking ban, had invested taxpayers’ money in munitions and tobacco industries, as was done by the NPRF. Similar discrepancies exist within banks that offer ethical investment options for customers yet, as institutions, fund “unethical” companies.

As with all forms of social responsibility, from recycling to volunteering, there is always more to be done. That is not an excuse for apathy; progress is made with positive action, no matter how small. So if you are interested in sustainable finance, ask about ESG options with your bank or contact an independent organisation such as EIRIS to explore your options.