Ethical investing means investing in a way consistent with your personal ethics. But as a formal definition, ethical funds include different types of financial investments, including ESG (environment, social, and governance), socially responsible, sustainable, impact, and moral. Below, we have listed several considerations that are integral to investing ethically and will help you create your own ethical investment funds.
Socially Responsible Investing
SRI funds seek to invest in companies that positively impact society and the environment while providing investors with a financial return. Investments are typically made in renewable energy, clean technology, healthcare, and education.
SRI can also involve avoiding investments in companies that are considered to have negative social or environmental impacts, such as those involved in the manufacture of cigarettes or gambling. While there is no guarantee of financial returns with SRI, ethical investors believe in achieving both financial and social goals.
An impact-investing strategy supports companies or industries that create community, social, or environmental change. For example, it is common for impact investors to invest in products like green energy, microfinance, sustainable agriculture, electric cars, or many other causes that are important to them. Focusing on impact investments often allows an investor to directly support a cause they believe in and be confident their money will impact the world for the better.
An ESG investment is a type of investment that focuses on companies that are considered to be leaders in these three areas. For example, a company may be an environmental leader if it works to reduce its carbon footprint or develop new clean energy technologies. A social leader might be a company committed to fair labor practices or providing access to essential goods and services.
Lastly, a governance leader would be a company with strong corporate governance policies to protect shareholders’ rights. Investing in companies making positive contributions in these areas can help promote sustainable business practices and make a difference in the world.
Moral investing is another great way to align your values with your investment choices. Some common examples of ethical investing include environmentalism, human rights, and animal welfare. Here’s another example:
If you care and value the environment, you might avoid investing in companies that engage in harmful practices like fracking or deforestation. You might invest in companies developing plant-based meat products if you care about animal welfare.
Moral investing is a way to use your money to support the causes you care about and improve the world.
So, what are ethical investments? Simply put, they are investments made in businesses or companies that meet certain moral criteria. More formally, they are funds or investments graded by different agencies as being proper stewards of corporate social improvement.
There are many ethical investments to choose from, so it’s important to research and find the right fit for you. By investing in ethically sound companies, you can feel good about your money while also helping to support causes you believe in.