Economists are placing a new emphasis on the importance of ethical investing, but how can you get involved? Kathryn Gaw reports

IS there any such thing as an ethical investment? In the post-financial crisis world, it is all too easy to dismiss money as the root of all evil, while smugly stuffing your savings under the mattress.

Unfortunately, it is a necessary evil that requires sensible management.

However, if you are lucky enough to have a bit of extra cash floating about, but can’t stomach the idea of handing it over to an investment bank or stockbroker, there may be a more palatable way to manage your finances.

Even before the financial crisis took hold, ethical investing was starting to enter the mainstream. The Co-op was pioneering sustainable investments as early as 1992, and according to ethical bank Troidos, socially responsible investments were worth £938.9bn in the UK alone in 2009.

Last week, a group of leading economists and campaigners gathered at the Transforming Finance Conference, in London, to explore a series of sustainable alternatives in the world of finances, which not only have a clear ethical benefit, but also stave off a new financial crisis.

Some of the ideas discussed included: limiting the balance sheets of banks; supporting renewable energies; increasing diversity in the banking sector, and making pensions work in the long-term.

‘‘The pre-2008 financial system failed society because it was riddled with shorttermism, secrecy, conflicts of interest, intermediaries and unproductive speculation,’’ says Finance Lab’s Chris Hewett.

‘‘We need a new financial system that takes a long-term outlook, thrives on transparency and diversity, and channels finance into productive activity that delivers for society, the environment and the whole economy.’’ So how can you get involved?

Banking on sustainability.

Troidos is perhaps the best-known ethical bank. It operates solely online and has a remit to be a pioneer of sustainable banking.

Last month, the bank launched its first sociallyresponsible investment funds in the UK, including an ISAfriendly stocks and share option.

On the high street, The Cooperative has a long history of sustainable banking, but its reputation has taken a beating over the past year, following its involvement in the Libor and PPI mis-selling scandals.

Charity Bank is the only UK-based bank which is registered as a charity. Its mission is to finance charities and socially-conscious organisations, by offering fair interest rates to its customers.

While it may not offer the most competitive interest rates on the market, it is regulated by the Financial Services Compensation Scheme, which means that any savings up to the value of £85,000 are protected by the financial regulator.

Ecology Building Society places an emphasis on green needs, including sustainable housing, renewable energies and supporting ways of living which have a low ecological impact.

Like Charity Bank, none of its interest rates currently beat the rate of inflation, but then again, most commercial banks aren’t offering inflation- beating savings accounts either.

If you want real returns, there are a plethora of sustainable and ethical investment funds on the market, from big hitters such as Aberdeen Asset Management (which offers the Aberdeen Responsible UK Equity Fund) to smaller outfits such as Kames’ Ethical Cautious Managed Fund.

While it is possible to get a great return from these sorts of investments, ethical investing is still seen as something of a charitable option.

But this will change.

Between impossibly low interest rates, stifling borrowing rates, and a neverending stream of banking scandals, a more ethical approach to investing may offer the only feasible future to our beleaguered banking industry, and its long-suffering customers.