Ethical and responsible mutual funds invest in shares and bonds by selecting those with the highest scores from an environmental, social and governance perspective. They can also ask the companies they invest in to commit to a lasting sustainable development process over time, monitoring the results.

What mutual investment funds are

A mutual investment fund can be compared to a shopping trolley pushed by asset management companies around an imaginary supermarket. The shelves (the regulated markets, such as stock exchanges) are stocked with shares, bonds and government securities from which one can choose.

Normally the trolley is filled with a certain number of products, with the aim of achieving what is technically known as "diversification". That is, investing across multiple securities in order to minimise the impact should any of them perform poorly.

Socially and environmentally responsible funds, and even more so ethical funds, avoid investing the money made available to them by savers in shares or bonds of companies that do not meet certain criteria, and commit to channelling it into sectors considered worthy.

Etica Sgr ✓ @EticaSgr

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«La strada dei prodotti di finanza sostenibile deve essere uno step intermedio, altrimenti gli obiettivi anche ambiziosi della @EU_Commission non saranno raggiunti».

@ubiggeri, Presidente di Etica Sgr, al congresso di @Consumerlab1

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Strategies for making investments ethical

Responsible funds avoid companies considered unsustainable or insufficiently ethical, keeping out of the "shopping trolley" — for example — producers of arms and tobacco, companies involved in nuclear energy, oil, coal or gambling, and companies implicated in serious incidents relating to issues such as respect for workers' rights, respect for the environment and corruption.

It is also possible to select companies with the highest scores within their own sectors. In this case the fund can apply evaluation criteria based on environmental, social and governance parameters, assigning them a composite score and selecting only issuers with scores above an absolute threshold (the "best in class" approach).

Can an ethical and responsible fund use its position to make the companies it invests in more ethical, more sustainable, more respectful of workers' rights, of the environment, and more transparent?

What active shareholding is and how it works

The answer is yes, through active shareholding. By purchasing shares, the fund becomes a part-owner of the company it has invested in. This status confers the right to vote at the general meeting of the listed company, and can steer businesses towards strategies, processes and products/services that integrate relevant considerations linked to social and environmental sustainability, and promote the creation and maintenance of a solid governance structure.

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Assemblea #TDK 2021
Etica non ha supportato l’elezione di due consiglieri che presiedono il Board ed il comitato remunerazioni, poiché il livello di #genderdiversity è basso.

Per maggiori info: eticasgr.com/storie/voto-in…

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♥ 1 9 lug 2021 · Apri su X →

The history of active shareholding is, moreover, a particularly long one. The idea of developing such activity dates back to 1928. At the time, the Pioneer Fund, created in Boston, in the United States, and managed by religious figures, had decided to purchase shares in order to ask certain companies to stop investing in sectors deemed "immoral". Then, in 1968, it was the turn of students at Cornell University, in New York, who called on the academic council not to invest in groups working with the racist government of South Africa during the era of apartheid.

Ethical finance was born to place people and the environment at the centre of financial, as well as economic, choices. This means recognising the limits of nature and of utilitarian action, and means adopting a long-term perspective of commitment. It is not the simplest choice, but it is the one that creates the most value.