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When you think of investing, what comes to mind? High returns? Exciting ventures? For most people, investing conjures up images of yachts, private jets, and CEOs getting fat paychecks. Ethical Investing
But there’s another side to investing: a side that values social responsibility and environmental sustainability. This type of investing is known as “ethical” or “socially responsible” investing.
As the name implies, ethical investing involves putting your money into companies that meet certain social responsibility standards in areas such as environmental impact, human rights, fair treatment of employees, and avoidance of shady business practices like animal testing or third-world sweatshops.
In this blog post, we explain what ethical investing is, the benefits you can expect when you invest in a socially responsible way, and why it could be right for you.
What Is Ethical Investing?
Ethical investing is using your money to support or oppose certain companies or industries based on your personal ethical beliefs.
While there is no industry standard for ethical investment, most investors are drawn to companies that support the environment and human rights, avoid harm to animals, do not discriminate against employees, do not make weapons, or support oppressive regimes.
Ethical investing can be applied to your entire portfolio or just a small portion. If you’re a long-term investor, it can be a way to ensure your money goes to companies that meet your standards while also providing diversification. If you’re a short-term investor, it can be a way to express your disapproval of certain companies or industries without resorting to violent protests or breaking the law.
How To Invest in a Socially Responsible Way
So, “How to invest in a socially responsible way?”. Finding ethical investments can be a challenge. Most mainstream funds avoid anything ethically questionable, so you’ll need to look for specialty funds or individual stocks. There are several ways to find ethical investments:
Researching Individual Companies
If you have a specific company in mind, you can research its practices to see if it’s ethically minded. Be sure to do thorough research and look at the company in multiple ways: its social responsibility, financial records, and its demand within the market.
Working With an Advisor
If you’re new to ethical investing, you may want to work with a financial advisor. Your advisor can help you find ethically-minded companies and build a plan that meets your ethical standards.
Using Ethical ETFs
ETFs are baskets of stocks that track certain indexes. An exchange-traded fund is a basket of stocks created to mimic the performance of a certain index. There are several ethical ETFs based on sustainability and social responsibility.
Check Out a Socially Responsible Investing (SRI) Fund
An SRI fund pools several investors’ money and invests it in various companies that meet ethical standards. You can find an SRI fund that fits your investment goals and risk tolerance.
Final Words: How To Be Aware as an Ethical Investor?
Being an ethical investor is a double-edged sword. It can allow you to feel good about your investments and help you avoid supporting industries that you feel are harmful. On the other hand, when the market goes up and down, your investments go up and down as well.
Be aware that not all socially responsible investments earn returns that meet your financial goals. Some socially responsible funds may not earn much or lose value. And some investments that are ethically acceptable to one person might not be acceptable to another.
In addition, the companies in an investment fund can change over time. So, review the companies in the fund regularly to make sure they still meet your standards and expectations.