Ethical Investment: How to get Rich AND Save the World
If you have money that you’re looking to invest, have you ever considered HOW you should be investing? Or WHAT you should be looking out for when you invest?
I wanted to put pen to paper and talk about another topic that is very important to me – that of ethical investing. As my business grows, I have become more and more aware of how my investments are more than simply a financial decision. I truly believe that we vote with our dollars – whether it be with our choice of groceries, with the products we use, or with how we invest. What we choose to invest in sends a signal to the market – signals which can help develop a model of sustainability, support companies who are doing the right thing, and send a big screw you to those that are not.
So - what is ethical investment? Basically, it is investing that betters both you and the world around us. Socially responsible investing encourages business practices which promote positive environmental impact, customer protection, diversity and/or human rights. Some investors will pointedly avoid corporates with links to gambling, weapons, alcohol, fossil fuel production etc. It’s an interesting concept, as it is subjective based on you, the investor, and what ‘ethical’ means to you. For some, it is about helping conserve the environment. For others, it may be concerns with tobacco, or pornography. If you are serious about investing ethically, it is imperative that you do your homework and find out exactly how the fund or company is managing their funds.
For those of you who are new to ethical investing (or new to investing at all, for that matter), I’ve broken it down into 4 broader investment groups you may want to consider.
Superannuation is a key starting point as this is an ongoing investment that most people already have setup. Typically, super funds will be set to the default investment option – normally a balanced fund. It is so easy for you to switch your superannuation to an option that invests sustainably, or if that is not available with your existing fund, it is easy to swap to a new superannuation fund of your choice. This can typically be done online within 5 minutes, but of course I would encourage you to make sure you read the T&Cs before making the move.
If you’re looking for an ethical super fund, a good place to start is the Responsible Investment Association Australasia (RIAA) – this is an excellent resource if you want to read up about which super funds are investing in ways that are sustainable. One Australian super fund that is leading the sustainability charge is Australian Ethical Super, which is well-established and provides transparent investment information. However, a quick google search will offer you a bunch of other options.
A fund is a “supply of capital belonging to numerous investors used to collectively purchase securities while each investor retains ownership and control of his own shares.” Basically, investing in funds is a way to gain access to diversified financial markets without the risk and exposure of being exposed to individual stocks. This is a great option, especially for those who are new to investing, or those who aren’t enthralled by the large levels of research that comes with dealing directly in the stock market. Canstar have pulled together a list of the Top Performing Ethical Investment Funds in 2018. If you are looking for diversified and managed investments, this is a great option for you!
For those a little more interested in the stock market, equities are another way you can make your mark. There are plenty of companies on the Australian Stock Exchange that are great fits for people looking to invest ethically. It is, however, important to do your research – are you looking to screen out companies who are connected to certain industries / products? Or do you want to practice positive investing, which is investing in companies because they are making positive contributions to society? You may want to consider looking into Australia’s healthcare or medical technology sectors, or perhaps the health food market may be more appealing to you. Whichever you prefer, it is key to look into that particular company’s funding sources, funding uses, supply chain, and their Corporate Social Responsibility practices.
Private Companies: Positive Investing
The last category I wanted to touch on is private companies, including the ever-bourgeoning industry of start-ups. These types of companies, especially start-ups, are often looking for investors to help get them off the ground. The associated risk with these types of investments is obviously higher, but like anything, there is a direct risk/reward correlation. When I talk about this group of companies, I mean ones like 5b, a company redesigning and investing in renewable energy. Or take, for example, sustainable fashion companies, such as those accredited by Ethical Clothing Australia.
It’s also good to keep in mind ways that you can support people to invest who are less fortunate than yourself. Please take a moment to check out sites like Kiva, where you can make a loan to an entrepreneur in need for as little as $25. These entrepreneurs will be raising money for classrooms, healthcare facilities and business opportunities in less developed countries. You do not make interest on these loans, BUT they are repaid 96% of the time and it’s an incredible way to help those in need.
My key takeaway is this – if you are interested in investing, and you give a damn about this world we live in, make the effort to invest in ways which are both ethical and sustainable, and which reinforce the positive behaviour of companies doing the right thing. There is really no excuse - information is now more available than ever and there are an abundance of resources online tackling this very subject. As well as the regulatory requirements of companies requiring them to disclaim almost everything, there are a bunch of apps like Goodments which help introduce you to the world of ethical investing. But this is just an example – there are so many ways for you to invest in a way that benefits both you and society.
What’s your favourite way to invest ethically? Leave a comment below – I’d love to hear your thoughts and recommendations!
The information on this page and the links provided are for general information only and should not be taken as constituting professional advice - you should consider seeking independent legal, financial, taxation or other advice to check how the information relates to your unique circumstances.