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What Are The Benefits of Ethical Investing

Ethical Investing - Is it for me?

There are many benefits from ethical investing, with the most obvious being the impact you can have on the world.

whatever it is you believe in, from improving the environment to a fairer world.

Returns

You may enjoy sustainable returns. Many socially responsible funds have achieved good results

Help The Planet

You may enjoy sustainable returns. Many socially responsible funds have achieved good results

Reduce Investment Risk

You may enjoy sustainable returns. Many socially responsible funds have achieved good results

de-risk yuor portfolio

You may enjoy sustainable returns. Many socially responsible funds have achieved good results

Live in Alignment with your values

You may enjoy sustainable returns. Many socially responsible funds have achieved good results

beneits – be a trailblaser!  As ethical invetsing gets more mainstream and easier to access then an icresingly proportion of the populatino will begin to invets ethically.  You can help push the effort forward by t=being in the vanguard of ethical investing, starting out when it was still a bit of a neiche activity / investment style.


change the corporate world

Since ethical investing is gaining importance, it will encourage other businesses to improve their ethical practices to attract funding.

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Invest in your values

We all make choices in our day to day lives when we spend our money and we are often guided by out value – for example by buying more expensive free trade coffee or 

If your values are important to you, then socially responsible investing allows you to put your money where your mouth is, so to say. It’s hard to insist you’re a committed environmentalist if part of your portfolio is invested in companies or industries that are destroying the environment. By investing in socially responsible businesses you’re doing more than talking the talk, you’re walking the walk–with your money.

Having this kind of approach, and sticking to your core values, will allow you to focus on other aspects of your financial life, such as automatic payroll savings, college savings, and purchasing a home. The limitations of ethical investing provide you with some assurance that you don’t have to check in on your investments continually. Just pick a few socially responsible funds and go with it.

Who doesn’t want to make money and feel good doing it? By investing in a socially responsible way that is aligned with your values, you’ll sleep better at night knowing that you’re trying to do good in the world. But the most rewarding feeling comes if you start making a good return on your investment. You’ll be making money and using your money to improve society as a whole.

YOU MAY ENJOY SUSTAINABLE RETURNS

Most people choose to invest rather than save due to the potentially higher returns available.  

 

Many socially responsible funds have achieved good results. According to the Responsible Investment Benchmark Report 2018 Australia, core responsible investment Australian share funds outperformed the average large cap Australian share funds over three, five and ten-year time horizons. Core responsible investment international share funds outperformed large cap international share funds over one and three-year time horizons and matched the ten-year performance.

De-risk your portfolio

More and more companies and investment funds are starting to take a more ethical and sustainable approach to business and how they allocate funds and capital.  Many are beginning to realise that a focus on environmental, social and governance (ESG) issues isn’t just about looking good for marketing and branding purposes, it’s also vital for their long term survival. 

The term ‘sustainability’ isn’t just about being clean, green and ethical its also about ensuring a business or investment’s long-term survival and ability to support future returns.  A business that looks to the future and prepares for it should be better placed to survive than one that doesn’t.

Find the right balance

Choosing to invest ethically and sustainably isn’t and all or nothing decision.  Deciding to dip a toe in and try out ethical funds can be a good way to find out if it’s for you. 

You can support your ethical *** with th eflxiblity of not having ot commit a signifacnt amout of our portfolio

 

Given the wide range of types of funds and how they determine what they invest in you can h

Change the corporate world

In the world of business, money talks.  While many companies may have a type of ethical goal as part of their core objectives there are many more for who the main objective by far is to increase profits and shareholder returns.  The only green or ethical effort many of these companies make is in their advertising or marketing – e.g. adding a “green product” to their range to show that they are a modern ethical company (while continuing with their existing unethical practices behind the schemes).

Yes as ethical investing continues to grow as fast as it is and gets increasing mainstream more large corporations will have to become more ethical as they know potential shareholders will be reviewing their performance on an ethical as well as financial front.

3. You’re rewarding ethical companies.

While at first it may seem that your ethical investing

 

It may seem like it’s being done on a small scale, but socially responsible investing punishes companies that act unethically, and it also rewards companies that are doing the right thing. If you want companies to make more responsible choices, you have to support them in the most tangible way possible, which is through investment capital.

To build off of the point above, the more people that begin to invest in socially responsible companies, the more rewards those companies will see. Long-term, this could be a catalyst for significant social change. A perfect example of this is Lego, who ended their partnership with Shell Oil a few years ago and is now partnering with companies like the World Wildlife Foundation on social initiatives. They’re also working toward having 100% renewable energy capacity by the year 2030 while committing to reduce their overall carbon footprint. Those are causes that couldn’t be funded unless individuals like you were investing in them.

Avoid Stranded Assets

What are stranded assets?

The concept of stranded assets is an important element of the financial argument against investing in fossil fuels. An asset (a thing you can own) becomes stranded if it can no longer be used.

For example, it is reasonably likely that, at some point in the future, the burning of fossil fuels will be greatly limited or not possible at all, either because doing so has become so morally reprehensible or because governments have implemented strict regulations in order to control carbon emissions.

Anyone holding fossil fuel assets would be in possession of assets that cannot be used, i.e. ‘stranded’, resulting in financial losses. To invest in fossil fuels is therefore not only morally unsound but also financially foolish.

YOU CAN LIVE IN ALIGNMENT WITH YOUR VALUES

Understanding more about Investments/Pension

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Is a socially responsible investment strategy right for me?
When investing in socially responsible funds, the focus should always be on your long-term investment strategy. It’s worth speaking to a good financial adviser who can discuss the pros and cons of ethical investing relative to your own personal situation. A good adviser will really listen about issues that are important to you. They will work with you to develop an investment strategy where your heart is, as well as manage the risk associated with that strategy.

2. You’re taking a stand.

It’s easy to complain about awkward situations, but infinitely harder to do anything about it. When you commit to socially responsible investing, it’s an opportunity to withhold your investment dollars from businesses that are not behaving. If more people invested only in companies that acted responsibly, the bad apples would be forced to shape up and make better choices.

Now, this is strictly a theory, but if you’re standing for a cause, it might motivate you. It’s the same reason people protest and stand up for purposes that may face insurmountable odds. But if nobody took a stand, no changes would ever happen.

Like all causes, it takes a snowball effect of people getting on board to make a change. Just last year, James Kynge of Financial Times said that “although ESG is still evolving as a concept, the pull it exerts over investors appears to be reaching critical mass.” Ethical investing is growing in popularity, which means more and more people are focused on investing in companies that are doing the right thing. I can’t say for sure what will happen, but I can’t help but think this is a good sign for big companies beginning to shift their practices to be more socially responsible.

4. You’ll sleep better at night.

If you haven’t picked up on this theme by now, I’ll say it for you. By investing in a socially responsible way, and assuming that it aligns with your values and you’re completely committed, you’ll sleep better at night knowing that you’re trying to do good in the world. Although none of us are perfect, most people genuinely want to do some good in the world. If you can invest your money in socially responsible companies, and make a profit doing so, you’ll have two things to feel good about–making money and using your money to improve the human condition.

The most rewarding feeling when you take an SRI strategy is when the companies you invest in begin to make a profit and reward you financially. Not only does it show that you’re aligned with the values of the companies you’ve invested in, but it also shows they’re profitably doing good. It’s a win-win, and quite rewarding.

You also don’t have to feel wrong about paying a little more for these investments (management fees, etc.) as one study shows that 66% of people around the globe are willing to pay more for sustainable goods. That number jumps to 73% with millennials. It’s always smart to focus on performance, but if you’re doing your research appropriately, you should rest easy knowing that you’re investing in a higher cause.

RISKI - NOT ALL GOOD

LIMITING YOUR INVESTMENT OPTIONS
It’s important to understand that when you limit your investment options because of ethical considerations, your return on investment could be compromised. You may take on extra risk and volatility, or miss out on great investment opportunities. For example, one of the largest and most successful socially responsible funds doesn’t include shares in Microsoft because of the company’s “competitive dynamics” fail to meet the fund’s ethics criteria.

NOT ALL ETHICAL COMPANIES HAVE POTENTIAL
It’s also important to consider the commercial realities of any decision taken to invest ethically. The vehicle battery swapping business Better Place is a good example. In 2008, Better Place started rolling out battery swapping stations across Israel. But the business went bankrupt in 2013 because there wasn’t yet sufficient demand for its products. At the time, electric vehicles had yet to reach critical mass and investors lost their money. Business ideas with an ethical focus only work when there is a sensible and truly sustainable commercial rationale behind them. This business may have potential now, but five years ago there wasn’t the underlying demand to make it work. Investors must be cautious and ensure ethical investment ideas have genuine scale.

YOU MAY PAY MORE IN FEES
It’s also important to examine the fees associated with any ethical investment. Often due to their smaller scale, some ethical investment funds charge fees that are higher than a standard managed fund. This is especially the case when compared to passive structures such as exchange-traded funds. These higher fees can significantly erode returns. Carefully assess the fees and charges to ensure you can generate a sufficient return for your investment objectives.

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