Ethical Considerations in Investment Portfolios
Ethical investors seek out companies that prioritize people over profits. This may involve providing staff a living wage, implementing equal rights policies or adhering to Fair Trade standards.
Ethical investments can take the form of either mutual funds or individual stocks; funds provide immediate diversification while stocks provide more control over screening processes.
Monopoly
Monopoly is an iconic board game that emphasizes the value of diversifying property investments in your portfolio and showing how dominant positions can be challenged – examples being Blockbuster, Toys R Us and Borders all having fallen from grace recently.
Ethical investing is a type of investing that aligns personal values with corporate social responsibility. Additionally, ethical investments may generate positive financial returns.
Investors have the choice between selecting individual shares or funds themselves or seeking advice from professionals, in either case it’s important that they understand their ethical priorities and any changes over time.
Some investors eschew pharmaceutical companies because they use animals in testing. Meanwhile, others praise them for the lifesaving vaccines they produce. There’s no one-size-fits-all definition of ethical investments, so the process of identifying suitable holdings must remain part of an investor’s routine.
Environmental Impact
Many investors choose ethical investments because of the environmental impacts they care about; such as those which devastate the planet or use animals in tests. Other investors might worry about companies dominating an industry, which could result in unfair pricing or less competition between businesses.
Ethical investing, also known as socially responsible investment (SRI), green investing, sustainable investing and impact investing, can have both a positive impact on society while helping you reach your financial goals.
At the core of ethical investing is identifying your personal values and priorities. Consider issues that matter most to you such as climate change or racism in the workplace and create an investing strategy based on those values. No one said ethical investing would be easy – however it is worth making every effort possible to protect both your financial goals and conscience!
Social Impact
Ethical considerations include avoiding companies that profit from industries that harm society, like tobacco and fossil fuels, even though they may offer greater financial returns. Ethical criteria also exclude companies using slave labour or depriving employees their rights.
Investors increasingly are turning to ethical funds as a way of aligning their investments with their moral compass without compromising financial returns. Studies have proven that ethical investments outshone traditional ones in performance.
When searching for ethical funds, look for those that provide an explanation of how they take environmental, social and governance (ESG) factors into consideration. Usually this information can be found in their prospectus that you can download from an online broker.
Companies That Are ‘Sinful’
Ethical investing (or socially responsible investment, SRI), is an emerging trend. Investors increasingly expect the companies they invest in to treat employees fairly, provide healthy products and services and avoid any unethical or illegal practices.
Some investors choose to avoid sin stocks such as alcohol, tobacco and gambling industries for religious or other personal reasons. Others may fear marketing to children or their effect on health as reasons to forgo them altogether.
An independent financial adviser can be invaluable when selecting ethical funds for your portfolio. While they won’t always pick the ideal funds, their experience in selecting good funds makes them more likely to do so than you. Furthermore, they’re likely to identify ethical funds that meet both ethical and financial objectives that allow you to feel good about investing your money responsibly.
