Demand for ethical investing continues to grow as more people seek to align their investments with their values. Ethical investing involves using your ethical principles to filter and guide your investment decisions. The practice has been around for more than 30 years in Australia and has started to gain significant traction in recent years.
If you’re looking to make some or all of your investments ethical, it can be tricky to know where to start. There are no standard rules or requirements that govern what constitutes an ‘ethical investment’ in Australia. Many products market themselves as ‘ethical,’ ‘sustainable,’ or ‘green’; yet, their ethical credentials vary widely. That’s why it’s essential to do your research and understand what you’re investing in before committing any funds.
Ethical investing strives to support industries making a positive impact, such as sustainable energy, and create an investment return. With an increase in ESG funds, there are more ethical investments than ever. This is a type of investing that assesses a company’s financial performance, along with its exposure to environmental, social, and governance (ESG) risks and opportunities.
There are also a handful of superannuation funds focused solely on ethical investing. These funds claim to apply a much stronger ethical lens to their investment selections, using negative and positive screening to actively exclude or seek out companies that fit their ethical criteria.
If you’d prefer to take a stronger stance on ethical investing, or the products from superannuation providers aren’t right for you, you might consider a self-managed superannuation fund. An SMSF gives you greater control over and transparency around how your assets are invested.
If you prefer to ‘do it yourself, you can invest directly by purchasing shares in companies that you believe to be in line with your values & principles. You’ll need to do your own research, but the process of analysing companies to invest in may help clarify what’s most important to you when it comes to ethical investing.
If you’re serious about investing ethically, it’s worth seeking the advice of a financial planning professional who specialises in the area. An ethical investing specialist can help you develop a financial plan, make product recommendations, and ensure that your investments align firmly with your values and meet your long-term financial goals.