Can You Invest Ethically? (How to invest for good)
Investing is nothing like it used to be, accessible to people from all backgrounds and income levels. With more investors coming into the market, more companies are looking for funding to grow their businesses.
But here is where there can be a split between what is available to invest in and what you actually want to invest in given your financial and ethical goals.
Luckily, some companies go above and beyond to operate ethically, some of which are open for public trading. Investing ethically is an option, though you’ll have to know what to look for. Finding the right companies and the right balance for your goals is key to profitable ethical investing.
Below, we’ll dive deeper into the topic can you invest ethically and provide some key things to consider when you’re on the hunt for an opportunity to invest your money with companies that emphasize ethical practices.
What Is Ethical Investing?
Defining ethical investing is a bit difficult because everyone has their own thoughts about what is ethical. For the most part, ethical investing involved investing in companies that operate based on a set of morals that are agreeable to investors.
Common thoughts about ethical investing would look to avoid companies that had any or significant investments in:
-Fossil fuels
-Tobacco
-Arms
-Medical testing on animals
For example, investors that don’t find coal, oil or gas an ethical thing to invest in look for a way to screen these out of their investments.
However, the definition of “ethical” and the limits which each investor wishes to follow are personal, so this definition can vary widely.
The definition can also vary across common investment fund names you might hear which include
- ESG or Environmental, Social, and Governance
- Green investing
- Socially responsible investing
- Impact investing
Again what they mean and to whom can vary so you need to do your research if the ethics of these funds match yours.
Because of this variety, no two investors are the same, making it a question you have to answer for yourself. You can only decide what you define as ethical, choosing your companies based on your beliefs.
Can I Make Money Investing Ethically?
While it sounds great to do things that are good for the planet and others, some investors are concerned if ethical investing can earn them money. The answer is of course, though, just like with all other investments, it’s not guaranteed.
Many companies on the market choose to do things ethically, whether it’s reducing their carbon footprint, refraining from unethical practices, or paying fair wages to both national and international workers.
Though they may be ethical, not all companies are created equal, and some are bound to fail. No investment is 100% secure, so it’s best to diversify your investments through one or more funds that hold lots of companies across varied sectors.
Though a lot goes into any kind of investing, the market is easier than ever to join. With a long list of brokers both online and in-person, you could start ethically investing in little to no time at all. We’ll get into more detail about that below.
How To Start Investing Ethically
Even if you’re not the most experienced investor, you can still start investing faster than you might think. There are numerous options out there, some of which are operated by brokers and others who use the help of robo-advisers.
A great thing to do before you start investing is understanding what you are investing for?
- Short term goals?
- Medium-term goals?
- Long terms goals?
Are you an experienced investor or do you need some education and guidance before you start investing?
Is your investing part of an overall life and financial plan or are you just guessing?
It might be worth getting some guidance and a plan, so you know where you’re trying to get to and what your options are before committing too much money.
However, if you’re ready to jump into the market and start investing, here’s what you’ll need to do.
Step 1: Find a Broker
While it should be quick, this is the step that you should spend the most time on. Look around and look for brokers that have the things you’re looking for. Not sure what to look for in a broker? Some things many investors consider are:
– Commissions
– Investment opportunities
– Portfolio opportunities
– Withdrawal and deposit fees
– Fees per trade
– Account inactivity fees
All of these make the difference between one broker or investment platform to another. Start by thinking about your goals with your investments and then narrow down your list from there. For some inspiration, some of the top brokers with socially responsible portfolio options are:
– Vanguard
– Fidelity
– Wealthfront
– Clim8 Invest
– Interactive investor
– Betterment
– Tridos bank
Step 2: Create Your Account
Once you have chosen your broker, you’ll need to create your account. This involves providing your information along with verifying your identity, depositing funds, and linking your bank account (if you choose to).
Step 3: Choose your Investments
Some of the brokers we mentioned above offer diversified portfolios that were carefully selected based on their social responsibility. You could simply go with a selected portfolio or take steps to create your own.
Keep in mind that this step requires you to do your homework, making sure that you’re not only selecting by their ethical practices but also their strength as a company.
And do you really feel like you have the time energy and knowledge to select your own companies?
Step 4: Configure your Account
Some brokers offer several options to configure your account, including automated trading, alerts for price drops, and more. You could play around with these options and set up your account in the best way that works for you.
Just make sure what you set up plays to your strengths and not weaknesses i.e., are alerts going to help you manage your money better for the long term or create opportunities for you to panic or get greedy?
Step 5: Sit Back!
Once you have things set up, it’s time to sit back and relax, keeping track of your investments as they play out on the market. Many brokers these days offer apps, most of which show real-time stats and provide detailed accounts of what’s happening with your money at any given time.
Just remember when you are investing in the stock market you need to think long term, not panic at every bad news story.
Know What You’re Investing In
One key to investing ethically is knowing what you’re investing in. A lot of times, investors only look at the bottom line, seeing how much they can make in the end. For those with concerns about the environment, it’s recommended to really dig into the companies in your portfolio and see how they operate.
Or at least be clear on what the fund you are investing in does and does not invest in.
For those doing things you don’t particularly agree with, you could stop investing with them and move your money elsewhere. The key is finding funds that can show they are investing in a wide variety of companies and sectors and doing it in a way that you agree with morally.
Make Money and Feel Good
Investing your money isn’t just about making a return. It’s also about supporting companies that are doing things you’re passionate about. Investing your money ethically is now easier than ever, leaving it up to you to define what’s important to you.
With ethical investing, you can make money and feel good about the companies you’re supporting, growing alongside them, and supporting them in their goal, no matter what it may be.
Conclusion: Can you invest ethically?
Yes, there are a number of ways to invest ethically. You can invest in companies that have a positive environmental or social impact, or that support sustainable practices. You can also invest in renewable energy companies and funds or that have a positive impact on climate change, people and nature.
You just need to decide if you will invest in single companies or funds of hundreds of companies and how much of the research you want to do yourself.
It’s all very doable with a bit of homework and planning.
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References
https://www.vice.com/en/article/3kjpmy/can-you-be-an-ethical-investor
https://www.investopedia.com/terms/e/ethical-investing.asp
Photo by Appolinary Kalashnikova on Unsplash
