What is ethical investing and is it worth your time?

As the world becomes more and more environmentally conscious, investors are increasingly having to decide between money and morals. But what if we told you that wasn’t a choice you had to make? Welcome to the reality and the advantages of ethical investing

What is ethical investing? 

As the name suggests, ethical investing involves making investments only in areas that align with your personal ethical code. This could be anything from renewable energy or charities to any industry that you feel is having a positive impact on the world at large.  

It’s also a term that can mean different things to different people. For example, some use the term whenever they’re making an investment that they feel is having no negative impact on the world while others only use it when making investments with a verifiable positive impact. 

The ethics of an investment can technically be graded on an ethical curve based on ESG (environmental, social and corporate governance) factors. However, it’s very much up to the individual at the end of the day. 

Can ethical investment make me money? 

As much as any other investment. The only difference is that, with the boom in global efforts to stop climate change, there has been a major boost to environmental and sustainable business markets. The best economics books have made this abundantly clear. Investing in these assets may prove to bring good returns as concern about environmental impact continues to grow. So, while you’re almost certainly getting into the field of ethical investment for moral reasons there’s no reason you can’t make money too! After all, the more money you’re making the better the planet is getting. Talk about guilt-free gains.  

No investment is ever guaranteed, of course, but research by Morningstar suggests that ethical funds outperform conventional peers by as much as 66%. As environmental concerns continue to gain traction in the media this is only going to rise in years to come, particularly in the wake of the COVID-19 pandemic, which has caused all of us to question our environmental impact. 

Building an ethical portfolio step-by-step 

  1. Decide whether you want to be hands-on or use a broker or advisor that specialises in ethical investments. AI investors are also an option now and they are much more affordable. 
  1. Before you make your first investment know what is ethical to you. There is a line you need to set yourself that you’ll feel comfortable with, otherwise you can easily find yourself drifting into less morally benevolent territory. 
  1. Build your portfolio with a diverse range of investments from individual stocks to mutual funds. The more diverse your investments, the more likely you’ll be to come away with some serious profits. 
  1. Do your research and never stop looking out for the latest ethical investments. It’s a world that is always changing and new opportunities are popping up every day. Don’t get left behind.

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