Many investors want to know that their investments are making a positive impact on our world and its inhabitants.
Socially responsible investment or ethical investing fits this bill with investors asking the hard questions about how profits are being made. Companies that make their millions through environmentally destructive behaviour or are socially irresponsible may find it harder to raise money when going public.
What is “ethical”?
Of course, “ethical” is a subjective term. For example, an ethical fund manager could define tobacco and gambling as unethical yet consider alcohol to be okay. Another ethical fund could be reluctant to invest in banks because they lend to companies that damage the environment. We are seeing this affect lenders that fund coal mining for example.
Obviously the important issue is what you, the investor, considers ethical. If you are contemplating an ethical investment then not only will you need to understand the financials of the potential investment but also ensure that the underlying businesses and their activities meet your standards.
Whilst it is difficult to lay down an exact formula for ethical investments, there are some basic values which many people share:
- Avoid causing illness, disease, or death;
- Avoid destroying or damaging the environment;
- Avoid treating people with disrespect.
In Australia, many well-recognised investment names are on the list of ethical fund providers. Although some ethical funds have achieved good results, as with any share-based investment, the focus is on long-term investing and sound management capabilities of the fund manager.
What about the risk?
Be aware that when the range of stocks available to fund managers is reduced because of ethical considerations, extra risk and volatility could occur.
If you are interested in learning more about ethical investing, contact us. Have some questions? Want to know how it applies to you? Want a review of your personal situation? Click here to book a Free 15 Minute Discovery Session, give us a call on 1800 577 336, or email us at hello@wealtheon.com.au.
Information on this site may be regarded as general advice. That is, your personal objectives, needs or financial situations were not taken into account when preparing this information. Accordingly, you should consider the appropriateness of any general advice we have given you, having regard to your own objectives, financial situation and needs before acting on it. Where the information relates to a particular financial product, you should obtain and consider the relevant product disclosure statement before making any decision to purchase that financial product.