THE WORLD faces a number of environmental and social challenges. The rise in technology and access to information has increased public awareness of these challenges.

People can now find out exactly where companies operate, the impact business has on the environment, how companies treat local communities and what effect business operations have on their employees.

The nature of the world has also changed, with conflict and competition for natural resources like never before.

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At the same time, companies have the most amazing ability to have a positive impact on the world around us − in the products they produce, jobs they offer and how they serve local communities. This has led to a rise in individuals and their advisers seeking underlying investment opportunities that can also ‘do good’.

Ethical investment is not new. The first corporation to seek investors, the Dutch East India Company, issued bonds and shares of stock to the general public in the early 1600s.

At the time, religious institutions boycotted the company over its involvement in the slave trade, but the boycott failed to achieve traction. This was because a small handful of wealthy individuals owned the company.

Today, listed companies are held by the masses in their pension funds. As ownership has grown, so have the concerns of those who wish to invest ethically. The first listed ethical funds were launched around a quarter of a century ago, with ethical investors wanting to exclude certain sectors deemed unethical, such as gambling, tobacco and arms companies.

Some ethical funds evolved into socially responsible investment funds, where more nuanced approaches to how companies dealt with sustainability matters became important - expecting companies to have environmental policies became the norm.

There is now a large number of investment products that cater to varied and growing concerns. An increasing awareness of environmental and social issues has given rise to a number of themed investments, such as climate funds or green bonds.

Therefore, across the investment industry, many active fund managers are now systematically looking at environmental, social and governance factors as part of their investment analysis and process, in order to take full account of the risks and opportunities these issues pose to the businesses in which they invest or are considering investing in.

Equally, passive managers are also considering ways in which these factors can be assessed in their investment strategies. New products continue to be launched that incorporate socially responsible values. These include traditional ethically screened funds that avoid investing in companies in the so-called ‘sin’ sectors, such as defence.

Some funds take a thematic approach to sustainability issues, such as climate funds or water funds. Others reflect personal religious values with various Christian or Sharia-based funds available to the consumer.

More recently, the social impact investment market has grown, which allows investors to direct their capital into social enterprises that seek both a financial and social return. This niche investment choice is slowly moving into the mainstream, with impact funds that positively screen companies based on their products or services, or select companies that have issued bonds to support social projects.

Impact investing products are being considered and launched across a variety of asset classes. The key criteria for any investor is to ascertain exactly what a fund’s policy is, and how the fund is constructed to ensure that their values are reflected in the underlying assets.

Historically, socially responsible investing was the preserve of the older generation. There is still a demand for different values-based investment products from those in their 40s and 50s but awareness of these issues is now stronger in the younger generations.

Importantly, millennials do have investment choices to make - they may not have a lot of spare money for investing but as pension auto-enrolment grows so does the demand for values-based investment options.

Investing in a way that reflects your values can provide the satisfaction that comes from putting personal beliefs into practice, as well as offering the potential for financial return.

Amanda Young is head of responsible investment at Aberdeen Standard Investments.