Q: The latest news on Sports Direct makes me question whether I should be more concerned about the ethics of the companies I am invested in through my pension and ISAs – where should I start if I want to invest more ethically? 

A: The first thing is to consider what “ethical” really means for you. From your question it seems that you have reached this turning point because of the social impact of the practices that some companies adopt. However, is this your only concern? When it comes to an ethical approach to investments, there are fewer absolutes than normal, and what is abhorrent to one person may be acceptable to another.

The easiest way to add an ethical slant to your investments is to consider those things which you are against and would not want to invest in. From the earliest days of “green” investment, fund managers have found it relatively easy to set out their stall in terms of Negative Criteria, for example avoiding companies involved in production weapons and components for weapon systems.

Once you look a little deeper though, things become more difficult. How do you feel about a company that manufactures aircraft engine components, where some parts are used in military aircraft? What about a company manufacturing transport for the military, where the transport is used to move nuclear warheads for decommissioning? Are you against investing in such companies regardless of how small a proportion of their business this is and what else the company does or how positive it is in other areas of concern to you?

As difficult as it may be to look into the detail of a company and make a decision on whether it meets your criteria or not, there are some sectors such as property where this may be virtually impossible. So, do you avoid property as an asset class completely, or do you accept that property is inherently neutral regardless of who may temporarily lease an office or a warehouse and include it for the diversification benefits it brings?

You need to think not only about what you are for and against, but also the extent to which you are prepared to compromise. Depending on how much you have to invest, you may be able to approach a specialist discretionary fund manager for a bespoke portfolio to meet your requirements. Alternatively you may have to settle for selecting a range of “ethical” investment funds and accept the broader compromises this may entail.