A guide to ethical investing

A guide to ethical investing

When you invest money, you do it with the hope that the amount you put in will grow. That’s enough for some people, and they won’t give it any more thought than that. However, many investors are becoming increasingly concerned with making sure their money is responsibly invested and will benefit others or the planet in some way.

What that means isn’t the same for everybody, of course. Different people care about different causes, so the concept of investing ethically will naturally cover a broad range of viewpoints and considerations.  So, if you’re interested in ethical investing, what do you need to think about?

Start with what’s important to you…

As we’ve already mentioned, investing ethically or responsibly isn’t the same for everyone. It could be that you don’t want to invest in certain types of industries, like alcohol, tobacco, and gambling. Or you want to only invest in companies involved in renewable energy or that have made a commitment to improving the environment.

Once you know exactly what your priorities are, you can look for funds that fit them. There are schemes, known as exclusion funds, that avoid investing in specific industries, companies and even countries seen as non-ethical. This might include oil and gas companies, as well as those involved in defence or weapons manufacture, for example.

… or take a more overall responsible approach

If you don’t want to get into specifics, but would just like to invest ethically, there are flexible funds that take environmental, social and governance (ESG) into account. Some will avoid certain categories altogether as above, while others might still invest in a company involved in one of these industries if they have strong environmental values or treat their people well.

They often have fund managers who encourage companies to take a more responsible approach, so more investors will find them appealing.

Can your investment make a difference?

There are also funds that see sustainability as the main factor for investments. In these types of funds, money is usually invested in companies that pledge to hit a sustainability target or that score highly in a sustainability index.

Sometimes companies might actively use your investment to make a difference (known as impact funds), such as producing less carbon dioxide, recycling extra waste or even give all of its staff a day’s mental health education, to help improve their expansion over the long-term.

Growth levels

As with all investments, there’s no guarantee of a return on your money. However, there’s no evidence to suggest ethical investments will perform any worse than any other. In fact, in a recent study by Morningstar, some of these funds are matching or outperforming traditional ones.

What these funds have in common is that they tend to invest in companies and industries that look to the future rather than the past. That means changing from fossil fuel investments to clean, renewable energy, like solar, wind and electric vehicles.

If ethical investing sounds like it’s for you, come and chat to us, so we can help you learn more about it and find the right find for you.