Wednesday Jul 23, 2014

What is Ethical Investing?

23 April 2012

Do you avoid certain products or companies because you don’t agree with how they behave? For example, you might make a point of not buying products because you know that the company has no qualms about testing on animals or because the product isn’t Fairtrade? You can extend this approach to who you arrange your financial products with.

Have you ever stopped to wonder what happens to the money after you’ve invested it and what it may be used for? Far from sitting around waiting for your investment to mature, your bank may use it to invest in things that you would object to. For example, if you are making a concerted effort to be ‘green’ and have even switched to an energy provider who backs you up on this, would you be happy to know that your retirement funds are being used to invest in fossil fuels?

Why Is Ethical Investing Important?

You may assume that this type of scenario is out of your control but you can have more impact than you might think. After all, ethical approaches to your finances have not been given much coverage until recently and many people are still unaware that there is even an option to do this. While you may not be able to stop the financial institution in question from involving themselves in these arrangements, you can choose to distance yourself from it.

iStock 000017823255XSmall What is Ethical Investing?

How do you go about this? You may have heard of ethical investing, which is a growing trend for those who care about more than just the rate of return on their investments. Instead, it is more concerned with balancing investment returns with the wider impact on society and the environment. In other words, you want your portfolio to work well for you but you also want to know that you are not involved with an organization which supports unsavory activities. Ethical investors are strongly against involvement with the likes of child labor, arms companies and dictatorships, and this can also extend to things like alcohol, tobacco, gambling and pornography.

Some things to think about include:

  • Who does your bank lend money to? For example, is it happy to lend money to companies who contribute to climate change? Do they make it difficult for those on a low income or the unemployed to access their financial products (and therefore add to the problem of financial exclusion)?
  • Does your insurance company have any scruples as to who they will or will not insure? If not, you may find that they have no problem insuring munitions factories, backing companies with poor human rights records and other situations that you may feel are not ethical.
  • Does your credit card company encourage responsible lending or are they happy to lend to anyone?
  • Does your mortgage company have a habit of lending to big companies whose activities you do not approve of? Do they offer any financial assistance to those who may fall behind on their repayments?

What Are The Benefits of Ethical Investing?

Through ethical investing, you have the opportunity to avoid companies that have no scruples in using your money for these purposes. In short, you can choose to only involve yourself with companies who activities you are happy to support. With such a wide range of ethical investment options on the market now, you should be able to find something which fits your stance. This may take the form of actively avoiding companies involved in activities that you don’t agree with, actively choosing companies whose behavior you are happy to endorse and/or trying to persuade companies to change their ways through this.

Remember though, it may not be possible to find an investment plan that satisfies all of the above criteria. However, there are still many plans that can come very close to satisfying the ethical needs of an investor.

So, how do you invest? Is being ethical and sustainable important to you? If you try to invest ethically, what have been some of your challenges?

About the Author

Prairie Eco-Thrifter

Prairie Eco-Thrifter does not want to have any regrets in life. Life is a privilege and her aim is to enjoy it as much as possible. Therefore, good money habits, staying healthy, and keeping the planet she lives on alive is critical to her (and you) enjoying a long, prosperous, and amazing life. She likes to try different methods and techniques when it comes to cooking, fitness, shopping, building wealth, travelling, and being frugal and she shares these on her blog. If you want to be inspired to live the life you have always wanted, we suggest you visit her site.

Comments (3 )



Ron Robins Wrote:

I’m glad to see you covered ethical investing.

Surveys all-over-the-world show that most investors want to invest in ethical companies and don’t want their investments being the cause of grief to others. Then since so many of our core values are alike — and are supportive of higher ideals — that in the long run, only companies employing these higher values will likely prosper.

I’ve been following ethical investing for some forty years.

In 2003, I founded a Canadian-based site to educate investors about ethical/socially responsible investing. According to Google rankings is one of the world’s most popular on this subject

It covers the latest related global news, research, books, links, articles, etc. It’s at http://investingforthesoul.com/

Best wishes, Ron

[Reply]

Miss T @ Prairie Eco-Thrifter Reply:

Thanks for the great resource. I will definitely check it out. I hope you are right when you talk about prospering on the long term. It still seems like sustainability is last on the list compared to instant profits.

[Reply]

Thanks for the valuable info about ethical investing. These days, we tend to search for financial deals only in terms of figures. The social responsibility emphasized by this concept is a great point for a meaningful and generally beneficial investment.

[Reply]

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