If you care about aligning your investment choices with your moral compass, you will be glad to know that ethical investing is on the rise with many funds structuring their portfolios to meet this demand. Ethical investing means supporting industries that are making a positive impact and an investment return.
Everyone’s idea of what is ethical is different so it’s important to do your research to be sure you are investing in an area in which you would like to create impact. Ethical investing is often interchanged with terms such as sustainable and socially responsible investing. There is also green investing, impact investing and Environmental Social Governance (ESG) investing. They are all built around a similar principle which is to create positive change by thoughtfully and intentionally investing your money.
What’s also interesting about this type of investing is that consumers are increasingly demanding it as an option. The 2022 research from the Responsible Investment Association of Australasia (RIAA) shows that Australians are upping the pressure on the finance sector – including super funds, banks and investment managers – to do more on climate change and avoid contributing to issues such as animal cruelty and human rights abuses.
The research also shows that Australians are putting these values into practice, with more Australians investing responsibly than ever before: the proportion of Australians with responsible investments is up 28% since 2020 to 17%, mostly Gen Xers and Millennials. A further 46% are considering investing in responsible investment products within the next five years, with 26% aiming to do so within the year.
Businesses that are making a positive impact are being supported by ethical investors
Is ethical investing profitable?
According to the latest research from RIAA, consumers increasingly understand the benefits to their hip pocket of investing responsibly, and almost two-thirds agree that responsible and ethical super funds/investments perform better in the long term.
This is based on the idea that companies that treat their employees well and are considered in their environmental impact are less prone to reputational damage which can adversely affect profits. Ethical companies are also more likely to avoid fines and lawsuits for things such as mismanagement of toxic waste, corruption, or tax evasion as they have policies to help avoid these situations occurring.
Identify what ethical means to you
Before you start exploring your options it is important to be clear on your personal ethical thresholds. For example, do you still see an oil company as ‘ethical’ if you know that it has implemented some vigorous environmental counter measures. Put a list together of those industries you want to avoid which will help in the screening process. If you have a particular interest in sustainability you may want to look for investments that address and improve on some of the United Nations Sustainable Development Goals (SGDs).
Get advice
It takes time and effort to properly screen a company. Greenwashing does occur and it is where companies make claims such as ‘green’, eco-friendly or environmentally conscious. These declarations are often exaggerated lip service and need to be substantiated. Our financial advisers can ensure that your money goes into credible investments that are in alignment with your values, and importantly provide a return in the long term. Get in touch.
General Advice Warning:The information provided in this article is general in nature and does not consider your particular investment objectives, financial situation, or insurance needs; we therefore recommend you seek advice tailored to your individual circumstances before making any specific decisions.
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