There are funds which merely exclude investment in specific activities or industries such as tobacco, gambling, alcohol and armaments. Others take a more pro-active stance, actively looking to invest in companies involved in environmentally sound, socially progressive businesses.

A third way, which evolved in the late 1990s, goes further. It is based on the belief that ethical or socially responsible investment should go beyond the 'avoidance' or 'supporting' approaches described above. Often called an 'engagement' or 'influencing' approach, here the investment fund will not apply any screening criteria to its investment choices. Instead, the fund manager undertakes to create a dialogue with a certain number of companies in the portfolio on a specific mber of social and 

environmental issues. The aim is to encourage them to adopt the best business practices. Those companies which are already demonstrating a good performance in this area are encouraged to continue to set the highest standards.

There are two main reasons why you would consider investing in ethical investment funds. First, you may feel it appropriate that your investment decisions should mirror your own personal views and behaviour. Ethical investment helps you to invest according to your principles.
Second, by investing 'ethically' you can gently influence companies to improve their ethical record. Like it or not, money makes the world go round. If companies found that unethical behaviour caused investors to withdraw their money, it would make them think twice.