Can you invest ethically?

When investing your hard-earned money, you can choose to do so bearing your values in mind. You can prevent your money from being used to boost companies whose ethics you don’t agree with. Instead, you can support those that are high-principled in their business practices. Whether you already have investments and are thinking of transferring them or are yet to invest but would like to do so ethically, read on to discover more about ethical investing and its benefits.

What is ethical investing?

Ethical investing enables you to choose where your money is invested to meet your moral, social or religious values while trying to make a profit. The types of issues taken into account with ethical investing include deforestation, intensive farming, animal testing, alcohol, gambling, climate change, workers’ rights, GM crops, tobacco, weapons and more. You can choose to exclude companies that deal with an issue you’re against and invest your money in companies that have a positive impact, such as those focusing on sustainable energy.

There are varying definitions of ethical investments and some of these are:

• Socially responsible investing (SRI): These investment strategies concentrate on companies tackling social, environmental and ethical issues. For example, having sustainable supply chains and gender diversity.
• Environmental, social and governance (ESG): These strategies take companies’ environmental, social and governance factors into account. For example, their handling of waste pollution, provision of good working conditions and avoidance of conflicts of interest.
• Impact investing: This type of investing proactively targets companies that provide significant environmental and social benefits in addition to gaining a return on your investment.
• Sustainable investing: This investment strategy focuses on companies that strive to tackle sustainability issues. Working to create a better future by tackling challenges such as climate change, these companies have the potential to grow exponentially and provide a significant return on your investment.

Will ethical investments make you money?

As with any type of investment, be prepared for the value of yours to go up and down. When compared to traditional investments, ethical investments perform in a similar way. They have actually been found to outperform them on many occasions. In the long term, ethical investments are believed to benefit from stronger growth due to the positive impact of the companies involved. This means you should be rewarded in the future for engaging in responsible investing.

How to choose ethical investments

Everyone has different values so there are no set ways to choose ethical investments. What you consider to be an issue may not be a problem at all to someone else. For example, you may feel strongly about animal testing and intensive farming. Another investor, however, may care more about human rights and be opposed to companies dealing in weaponry.

You can start by deciding which industries you want to avoid. Just be aware that if your options are too limiting, it can be hard to find a good investment route to take. It’s best to diversify your investment portfolio across various regions and sectors to guard against any dips in the relevant markets.

One way to choose your investments is by completely excluding companies that go against your principles. However, you may also consider including those that are trying to minimise the damage they cause and are investing in better ways to operate. For example, an oil company focusing on renewable energy. Another way to select your investments is by supporting companies that are already environmentally and socially responsible, proactively working to create a positive impact for a better future.

How can you invest ethically?

Once you’ve chosen the types of investments you wish to include and exclude, you need to decide the type of approach that suits you best. You can buy shares in particular companies that stand out to you. Or you can build up a varied ethical investment portfolio by researching different companies and weighing up their activities. Ethical funds include numerous companies, providing you with a much more diverse range of investments.

Alternatively, a financial broker can match your preferences with the investment options available. As they continually monitor companies to determine their ethical standards, this saves you time and you can benefit from their expertise when it comes to investing your money in the best way to match your values.

Get help with investing ethically

You may already have invested in a pension or an ISA that doesn’t quite meet your values. As a result, you’re looking for a more suitable pension solution or investment strategy. Or you may be interested in investing your money but only if the companies align with your principles and you don’t know where to start. At Trinity Finance, we collaborate with an independent financial organisation that specialises in ethical and sustainable investing. Just give us a call on 01322 907 000 or email us at info@trinityfinance.co.uk. We’ll arrange a free consultation for you. You can discuss your values and financial goals with a qualified financial adviser. This will enable them to search for the optimum ethical investment solution for you.

Disclaimer: The information written above is intended as a guide to inform, educate and generate discussion. It is not to be used in place of specific and personalised advice from a qualified financial adviser. Investments can go down as well as up.