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Components of Ethical Investment

19 December 2014 - Features - Editor

The general perception that making money and ethical investment are mutually exclusive concepts has become outdated as many publicly traded companies take into account the expectations of increasingly ethical consumers and investors. Also, with investors being more aware of the need for transparency, companies are unlikely to get away with 'greenwashing' their products, services and strategies. Investors are in the position to influence companies to find ways to make money while doing what is best for the environment and society, and many are tapping into this advantage.

Ethical investment has two main components – avoiding unethical investments, and choosing positive ethical investments. If enough investors start avoiding companies that pursue profits at the expense of the environment and society, these companies will be obliged to rethink their business strategies. With the advances in technology and the power of social media, investors can find out everything they need to know about a company before making an investment. Ethical investors who choose to invest in mutual funds should be diligent in finding out exactly which companies are included in the fund. The same would apply to retirement funds. While there may be differing opinions on what constitutes an unethical company, it is generally agreed that these would include companies that cause illness and disease, destroy or damage the environment, exploit vulnerable members of any society. Some companies may try to offset the damage they do by financially supporting worthy causes, but this is really just a form of greenwashing.

Some ethical investors may choose to invest in companies that address issues and support causes they care about, while others are content to support companies that avoid unethical practices. It's good to bear in mind that more consumers are supporting ethical products, such as those adhering to various Fair Trade principles, and it makes sense to support companies consumers are supporting. Obviously the market performance of companies is very important, but with a bit of extra research and awareness of market trends, it is possible to make money as an ethical investor.

 


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