Ethical or socially responsible investment (SRI) is the practice of consciously selecting investments in activities which will serve the common good. It allows people to ensure their savings and superannuation aren't being used to support companies whose activities harm society and the environment.

But while more people are turning towards investing their super and savings with an ethical fund manager, note that not all ethical fund managers are the same. SRI fund managers differ in the ways that they screen potential investments. Most SRI fund managers will apply a negative screen, which means they aim to avoid investment in certain industries. They could have a broad range of industries which they exclude or it could be just one or two. So while your SRI investment may exclude arms manufacture, it may still include uranium mining. Furthermore, Ethical investments often include banks in their portfolio that have no policy on where they invest your money.

The point is, just because a fund manager claims to have an ethical investment option it doesn't mean their investment process will align with your own ethical and environmental attitudes. Have a look at some of the corporations included in some funds marketed as socially responsible and ethical in 2007:

AMP:
BHP Billiton (Uranium Mining)
Aust Mining Investments
Dyno Nobel
Iluka Resources
Roc Oil Company
Woodside Petroleum
Coles-Myer
NewsCorp
Great Southern Plantations (Logging of Old Growth Forests)
Alchemia

Ausbil Dexia:
Petro Canada
Ford
Deere
General Motors
Asahi Breweries
Anhauser Busch
Transalta
Colgate-Palmolive
Adidas

BIAM:
Petro Canada
Harley Davidson
BMW
Honda
Nestle
Pepsi
Walmart

Fat Prophets:
BHP Billiton
Rio Tinto
Lihir Gold
Perseverance
Newcrest Mining
Meteoric Resources
Aust Worldwide Exploration
Oil Search
Woolworths
Telstra
The big 4 banks

THE ALTERNATIVE

Instead of negative screening, SRI fund managers may use positive screening. This actively seeks to identify and support beneficial ventures. Australian Ethical Investment uses both negative and positive screening and is generally considered to have a highly rigorous approach to ethical investment. It avoids the broadest range of areas and is one of the few fund managers to actively seek beneficial investments. As such Australian Ethical's portfolio is dominated by companies in areas such as renewable energy, recycling, water conservation, organic food, alternative transport, education and healthcare.