But what does ethical investing mean?

Ethical Investing — What It Is and How To Do It

Investing is typically perceived as a wealthy-only pastime with no regard for the environment or social issues. However, that is not always the case, and the old mindset of making money for its own sake doesn’t need to stay.

People have become increasingly interested in ethical investing in recent years. Investors involved in environmental, social, and governance or ESG ethical investing urge corporations to steer clear of harmful environmental practices and improve working conditions.

But what does ethical investing mean? How does it relate to ESG investing?

ESG vs Ethical Investing

Sustainable ethical investing is a subcategory of ESG investing.

It’s vital to remember that ESG investing isn’t a technique for investing but rather is a focus for investors. This means that besides practising standard investment techniques, ESG investors seek investments that are low-risk and have proven beneficial social and environmental impacts.

Ethical investing is concerned with assisting socially responsible businesses in growing. These companies usually uphold ESG activities to a high standard.

The United Nations Sustainable Development Goals serve as a starting point for investment businesses promoting these portfolios. The United Nations set 17 goals, including eradicating hunger, fostering innovation, constructing sustainable cities, and producing clean energy.

Ethical investing excludes corporations that conduct unethical business practices or whose operations negate ESG goals.

Below are some examples of businesses or activities an ethical investor will not invest in:

  • Adult entertainment
  • Alcohol
  • Defence-related
  • Gambling
  • Oil and gas or fossil fuels
  • Tobacco

Instead, an ethical investor would look at companies that follow strict environmental, social, and ethical guidelines. Some excellent examples of publicly traded global companies an ethical investor would be interested in include:

  • Puma
  • Hennes & Mauritz (H&M)
  • Capgemini
  • Ford
  • IBM
  • Volvo Cars
  • Microsoft

For ethical investing, you have numerous industries and businesses to choose from. These include:

  • Education:
  • Energy Efficiency:
  • Financial Services:
  • Food Production:
  • Government:
  • Health and Wellbeing:
  • Media:
  • Recycling, Waste Management and Water Treatment:

The above list is just the tip of the iceberg – and this is a good thing, as it means more businesses are paying attention to the ESG principles of responsible investment.

How to Get Started

The thought of getting into ethical investing may seem daunting, and yet it’s quite easy to get started. There are plenty of ethical investing books and online resources you can access to learn more.

Besides, anyone whose values align with ESG goals and who has money (even a modest sum) set aside for investments can become an ethical investor.

Get in touch with a reputable investment management firm or choose a superannuation fund that shares your values. They will not only help you invest in companies that uphold ESG principles, but they will also build your portfolio prudently.

If this article has inspired you to think about your own unique situation and, importantly, what you and your family are going through right now, please contact your advice professional.

(Feedsy Exclusive)


Story originally appeared on fca.org.uk

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