Question

1. Focusing on an investment portfolio with ethical investments:

1. Allows investors to integrate personal values and social concerns with their investment objectives.
2. Potentially creates adverse diversification issues for the investor increasing their investment risk exposure
3. Both a) and b)
4. Is not likely to be constrained by a lack of information available from many companies regarding this issue.

Answer 1

The correct answer is Option C

Ethical investing refers to the investing according to the investor's own principles and only in those stocks which integrates the Personal value and socially concerned, These principle do varies with different individuals, and generally investors exclude investing in stocks of companies which are engaged in immoral activities or litigations.

The etchical investing leads to adverse diversification because the chance of return to get higher returns is significantly reduce as we exclude many of the stocks and thus leading portfolio to more risk.