What does ethical investing mean? How does it relate to ESG investing?

Investing is typically perceived as a wealthy-only pastime with no regard for the environment or social issues. However, that is not always the case, and the old mindset of making money for its own sake doesn’t need to stay.

In recent years, people have become increasingly interested in ethical investing. Investors involved in environmental, social, and governance (ESG) ethical investing urge corporations to avoid harmful environmental practices and improve working conditions.

But what does ethical investing mean? How does it relate to ESG investing?

ESG vs Ethical Investing

Sustainable, ethical investing is a subcategory of ESG investing.

It’s vital to remember that ESG investing isn’t a technique but rather a focus for investors. This means that besides practising standard investment techniques, ESG investors seek investments that are low-risk and have proven beneficial social and environmental impacts.

Ethical investing is concerned with assisting socially responsible businesses in growing. These companies usually uphold ESG activities to a high standard.

The United Nations Sustainable Development Goals serve as a starting point for investment businesses promoting these portfolios. The United Nations set 17 goals, including eradicating hunger, fostering innovation, constructing sustainable cities, and producing clean energy.

Ethical investing excludes corporations that conduct unethical business practices or whose operations negate ESG goals.

Below are some examples of businesses or activities an ethical investor will not invest in:

  • Adult entertainment
  • Alcohol
  • Defence-related
  • Gambling
  • Oil and gas or fossil fuels
  • Tobacco

Instead, an ethical investor would look at companies that follow strict environmental, social, and ethical guidelines.

Some excellent examples of publicly traded global companies an ethical investor would be interested in include:

  • Puma
  • Hennes & Mauritz (H&M)
  • Capgemini
  • Ford
  • IBM
  • Volvo Cars
  • Microsoft

For Australian ethical investing, you have numerous industries and businesses to choose from.

These include:

  • Education: Macquarie University, 3P Learning Ltd., Benesse Holdings, Inc., University of Technology Sydney
  • Energy Efficiency: Owens Corning, Jungheinrich AG Pref, Yaskawa Electric Corporation, Avnet, Inc.
  • Financial Services: Teachers Mutual Bank Limited, Chubb Limited, Kiwibank Limited, Westpac Banking Corporation, Apollo Series, International Bank of Reconstruction and Development
  • Food Production: Costa Group Holdings Ltd., Graincorp Limited Class A, Morrison & Co Growth Infrastructure Fund
  • Government: Australian Government Bond, Kommunalbanken, South Australian Financing Authority, Tasmanian Public Finance Corp, New South Wales Treasury Corporation
  • Health and Wellbeing: Health Care Providers & Services, Anthem, Inc., Cardinal Health, Inc., Healius Limited, Henry Schein, Inc., EssilorLuxottica SA
  • Media: Pearson PLC, Sirius XM Holdings, Inc., Domain Holdings Australia Ltd.
  • Recycling, Waste Management and Water Treatment: Asahi Holdings, Inc., Covanta Holding Corporation, Sims Ltd., Veolia Environment SA

The above list is just the tip of the iceberg – and this is a good thing, as it means more businesses are paying attention to the ESG principles of responsible investment.

How to Get Started

The thought of getting into ethical investing may seem daunting, and yet it’s quite easy to get started.  There are plenty of ethical investing books and online resources you can access to learn more. Besides, anyone whose values align with ESG goals and who has money (even a modest sum) set aside for investments can become an ethical investor.

Partnering with a trusted financial adviser who shares your values is key to optimal financial guidance. We can assist you in investing in companies that uphold ESG principles and tailor a portfolio to meet your specific needs and outcomes.

Our experienced financial advice team are here to assist you with your investment strategy and how it aligns with your values. Reach out to the Sherlock Wealth team here.

(Feedsy Exclusive) Source: Matrix Planning Solutions

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