What is Ethical Investing?

Ethical investing, also known as socially responsible investing (SRI), sustainable investing, or impact investing, is a type of investing that considers the environmental, social, and governance (ESG) factors of companies in addition to their financial performance. 

Ethical investors want to invest in companies that are making a positive impact on the world and that align with their personal values.

Why is ethical investing important?

Ethical investing is important for a number of reasons. 

First, it lets investors align their money with their values. For many people, it is important to invest in companies that are making a positive impact on the world. Ethical investing also has the potential to generate good financial returns. Some studies have shown that ethical funds tend to perform at least as well as traditional funds over the long term.

Examples of ethical investments

Examples of ethical investments include:

• Companies that are leaders in ESG performance: Some companies are leading the way in ESG performance. These companies commit to reducing their environmental impact, improving their social practices, and maintaining good corporate governance. Examples of companies with good ESG ratings include Microsoft, Apple, and Alphabet.
   
• Companies that are working to address specific social or environmental challenges: Some companies are working to address specific social or environmental challenges. For example, some companies are developing renewable energy technologies, while others are working to improve education and healthcare in developing countries. Examples of companies that are working to address specific social or environmental challenges include Tesla, Enphase Energy, and International Development Finance Corporation.
   
• Funds that track ethical indexes: There are a number of funds that track ethical indexes. These indexes invest in companies that meet certain ESG criteria. For example, the S&P 500 ESG Index invests in the largest 500 U.S. companies based on market capitalisation, while excluding companies that engage in certain business activities, such as tobacco production and weapons manufacturing.

Other ethical indexes may have different criteria, such as focusing on companies that are leaders in renewable energy or social responsibility. When choosing an ethical index fund, it is important to research the criteria used to select the companies in the index to make sure that it aligns with your values.

How to get started with ethical investing

If you want start investing ethically, there are a few things you can do.

• First, it is important to define your own personal values. What are the issues that are most important to you? Once you have a good understanding of your value, you can research companies that align with them.
• There are a number of resources available to help you research ethical investments. You can find information on the websites of ethical investment firms, rating agencies, and non-profit organisations. You can also talk to a financial advisor who specialises in ethical investing.
• Once you have identified some companies that you are interested in investing in, it is important to do your due diligence. This means researching the company's financial performance, ESG practices, and management team. You should also read the company's annual report and other public filings.

Different types of ethical investing

There are a number of different types of ethical investing. Some of the most common types include:

• ESG investing: ESG investing is a type of investing that considers the environmental, social, and governance factors of companies in addition to their financial performance. ESG investors may invest in companies with good ESG ratings or in funds that track ESG indexes.
   
• Socially responsible investing (SRI): SRI is a type of investing that focuses on investing in companies that are making a positive social impact. SRI investors may avoid investing in companies that are involved in harmful industries, such as tobacco or alcohol. They may also invest in companies that are working to address specific social challenges, such as poverty or climate change.
   
• Sustainable investing: Sustainable investing is a type of investing that focuses on investing in companies that are environmentally sustainable. Sustainable investors may avoid investing in companies that have a negative impact on the environment, such as fossil fuel companies. They may also invest in companies that are developing renewable energy technologies or other sustainable products and services.
   
• Impact investing: Impact investing is a type of investing that seeks to generate both financial returns and social or environmental impact. Impact investors may invest in companies that are working to address specific social or environmental challenges, such as climate change or poverty. They may also invest in funds that track impact investing indexes.

How to choose the right ethical investment strategy

The best ethical investment strategy for you will depend on your individual needs and goals. Consider the following factors when choosing an ethical investment strategy:

• Your values: What are the issues that are most important to you? Do you want to invest in companies that are working to address climate change, promote social justice, or support sustainable development?
   
• Your risk tolerance: How much risk are you willing to take with your investments? Ethical investments can be just as risky or as risk-averse as traditional investments.
   
• Your investment goals: What are you hoping to achieve with your investments? Are you saving for retirement, paying for your child's education, or buying a home?

Ethical investing is a great way to align your money with your values and make a positive impact on the world. There are many ways to approach ethical investing, so it is important to do your research and choose a strategy that is right for you.

Ethical investing is also becoming increasingly popular. As a result, there are more resources and investment options available than ever before.

When building your portfolio and choosing an ethical investment strategy, it is important to consider your values, risk tolerance, and investment goals. You should also do your due diligence on the companies and funds that you are considering investing in, or talk to a financial advisor who specialises in ethical investing.

* The value of investments can go down as well as up and you may not get back the full amount you invested.