What exactly is Ethical, Sustainable and Thematic Investing? Decoding the Jargon!

by Reece Biggadike, Financial Planner

Many of us are now making more responsible choices as consumers. Accordingly, we are increasingly interested in generating a positive impact with our savings and investments. Holden & Partners has been pioneering this approach since its inception in 2003 and can confirm that investing in this way continues to gain momentum. However, the financial industry tends to involve a lot of jargon, so it is useful to break down some of the common terms before deciding which approach may suit you best:

Ethical Investment: Ethical investing is a term used to describe the practice of applying screening criteria to companies to decide whether they should be included within a portfolio. There are two main types of screening that are commonly used: negative and positive.

Positive Screening: An approach that helps select investments that set positive examples of environmental and socially responsible business practices. For example, positive screening may involve exposure to the renewable energy or recycling industries. Conversely, negative screening will exclude companies that do not comply with certain social or environmental criteria; companies that are involved in the production of arms, tobacco, gambling, alcohol or animal testing, for example.

Sustainable Investment: Sustainability focuses on meeting the needs of the present, without compromising the needs of future generations. At Holden & Partners, we interpret this as identifying investments which are providing solutions to sustainability challenges, and therefore have the capacity to prosper in a competitive and changing global environment. Sustainable investing includes investing for a better climate, in sustainable goods and services, and to further technological and medical advancements.

Thematic Investment: Identifying global trends and themes that are likely to influence financial markets and the way we live our lives, whether they are driven by economics, politics, cultural or demographics changes, or a combination of all factors. It then targets companies which are well-positioned to capitalise on these structural themes.

Environmental, Social and Governance (ESG) Criteria: A way of analysing companies according to how well they follow corporate governance rules and benefit the environment and society. ESG analysis now plays a large role in traditional fund management in managing risk and decision making.

Socially Responsible Investment (SRI): Socially responsible investment is an all-encompassing term which describes a range of investment approaches focusing on companies that consider social and environmental challenges. As shareholders in a business, the fund managers have the right to vote and voice their opinion on how an organisation is run. The onus is on changing and improving matters from within a company rather than excluding companies altogether.

Impact Investing: Investing in a way that delivers a positive social and/or environmental impact as well as a financial return. Companies and funds will report on the social and environmental impact delivered.

Social Investment: An investment into voluntary and community organisations, charities, or social enterprises where a return on ‘impact’ (social, economic or environmental change) is hoped for/expected alongside financial returns.

Green Investments – a generic term used to describe investments which focus on environmental issues.

Greenwashing: In some instances, companies can be guilty of ‘greenwashing’. This occurs when a company’s PR and marketing teams put a misleading spin on their products or services giving the impression that they are environmentally friendly when this may not be the case.

At Holden & Partners we use our own terminology:

Ethical Sustainable & Thematic (EST) Investment – Our unique approach to investment. The concept is simple: investing in a way that acknowledges future threats and opportunities in society and considering a wide range of issues to assess potential returns. This may be achieved through the purchase of ethical funds, which screen out areas of the market engaged in controversial industries or those exposed to a particular sector-wide risk; sustainable funds, which focus on the ability of companies to ensure the longevity of their products, processes and business models; thematic funds, which identify global macroeconomic themes and seek out opportunities which are best-placed to capitalise upon them.

Unfortunately, we think the jargon is here to stay, but we hope that Holden & Partners can continue to help you understand some of the more specialist terms. We have extensive knowledge in ethical, sustainable, and thematic investment which has been developed over fifteen years since our inception. As always, if you would like to find out more, please get in touch.


The content of this article is for your general information and use only and is not intended to address your particular requirements. It should not be relied upon in its entirety and shall not be deemed to be, or constitute, advice.


Reece Biggadike
Financial Planner