By Nkiruka Nnorom

Investing in ethical stocks is more attractive as they deliver more returns to investors compared to other asset classes. This was the position of asset managers at Capita Assets Limited, in a data provided by the company that tracked percentage returns of various investment options available in the Nigerian capital market.

File photo: The floor of Stock exchange

According to information extracted from the data, average return by the common benchmark index of the Nigerian Stock Exchange (NSE) over a seven-year period stood at 3.71 per cent, while that of ethical funds during the same period was 19.27 per cent.

The data, which covered the period between 2009 and November 6, 2015, analysed year-on-year returns by the NSE’s All Share Index (ASI) and the NSE Lotus Islamic Index (NSE LII). The NSE LII is a weighted index that tracks stocks that comply with the Islamic rules on equity investments.

In an accompanying note to the data, Head, assets management, Capital Assets Limited, Mr. Azeez Adenle, said ethical investors could have the better of two worlds by earning good returns on their investments and still keeping to their beliefs, whether social, political, economic or religious beliefs.

“The amount of finance designated as being ethically invested in the United Kingdom currently exceeds £1 billion. In the United States of America, over 20 times this amount is invested ethically, including finance which is invested in environmentally friendly projects and companies which are screened using moral criteria.

Major ethical investment stock market indices include Calvert Social Index, Dow Jones Islamic Market Index, Dow Jones Sustainability Index, FTSE KLD 400 Social Index, FTSE 4 Good Index and NSE Lotus Islamic Index,” Adenle noted. According to him, contrary to assumption that insisting on ethics and beliefs might jeopardize returns on investments, ethical investors actively invest in the stock market and make better returns than other average investors.

He, however, noted that due to the intricacies in equity portfolio management and the specialized nature of ethical investment management, investors should seek advice from or engage professional assets managers who possess the know-how to handle the investor’s portfolio profitably without compromising his instructions.

According to him, investors can also have a range of choices when constructing an investment portfolio that is based on their beliefs and religious leanings, including investments in unit trusts, mutual funds, exchange traded funds (ETFs), investment companies, private placements and public issues.

He pointed out that while ethical investments are usually identified with Islamic rules, ethical investments can also reflect other religious beliefs as well as social, political and economic opinions of the investors, especially activists in some specified areas.

He added ethical investments could be in Muslim businesses and in conventional institutions and businesses which undertake to deploy funding from investors on ethical basis. He outlined two broad strategies for ethical investment to include positive and negative strategies, saying that under positive strategy, investors support investment in companies which are particularly approved of in terms of their products, activities or business methods.