More and more everyday Australians are beginning to 'play' the stock market, yet for some investors, there are plenty of companies out there who aren't worth the lack of sleep that investing in them may cause. If you've wondered what ethical investing is, or how you can ethically invest, read on for a short guide.
What is ethical investment? socially and environmentally ethical investments
Ethical investment, in the simplest terms, is a way of investing your funds without compromising your own values. For example, you may have a financial advisor that suggests some particular shares will perform well, but you might be opposed to the company the shares are in. If you are not at ease with personally profiting from whatever it is a given company does, such as producing weapons, carrying out destructive mining practices or employing child labour in developing countries, ethical investing could be the way to go. According to Australian Ethical Investment, a leading ethical investment company, socially responsible investment is growing faster than the general market, with a 41% increase since 2003.
Ethical investment funds: positive and negative screening
There are a growing number of ethical investment funds in Australia and through these you can carry out the type of ethical investment that works for you. For example, you can screen particular funds 'positively', meaning you actively look for funds you deem socially responsible, such as an investment in wind power. Or, you can screen 'negatively', perhaps avoiding investing in oil or nuclear. Roger Green, Marketing Manager for Australian Ethical Investment, also suggests a 'Best of Sector' approach, whereby you select leading firms in each business sector based on their behaviour, or carry out a 'Social responsibility overlay'. With ethical investing, there are many options available from direct debit savings to diverse share portfolios.
Financial benefits: sustainable responsible investment
Having your funds in Sustainable Responsible Investment (SRI) is sometimes derided by opponents, as some sectors that you may be financially better off in are missed out. Not only is this the point of ethical investment - that you avoid certain sectors for ethical reasons - but you don't have to miss out on good earnings. According to the Ethical Investment Association, ethical funds were on par with mainstream funds in terms of returns in the five years running up to 2006.
