How Ethical is Ethical?
Did you know that Woolworths may be considered an ethical company to invest in under some screening? But did you also know that Woolworths are the biggest operator of pokies in Australia? Similarly, banks could be determined ethical, but they lend money to the fossil fuel industry etc.
Recent statistics show that 65% of Australians say they consider social issues when they make purchases. Many of them are also now considering how they invest, in order for their investments to align with their values. So, given the above, you need to consider how diligent you want your strategy to be when implementing it.
Ethical or socially responsible investing is an investment strategy which seeks to consider both financial returns and social/environmental good to bring about social change.
A socially responsible strategy promotes environmental stewardship, consumer protection, human rights and racial or gender diversity. The strategy generally avoids businesses perceived to have negative social effects like alcohol, tobacco, gambling, weapons, and fossil fuel.
You may think that by excluding businesses like the above from your investments will hurt your investment returns, however on average, ethical funds have actually performed very well over the years, often outperforming their rivals.
If making socially responsible choices is something close to your heart then the good news is that it is becoming easier and easier to invest in an ethical way with many investment companies providing more and more ethical options through managed funds, ETF’s and managed accounts.
Have you ever considered how your portfolio is invested?