New year, better portfolio. Why investing ethically makes more sense.
A new year often means new beginnings. We clear out the house, make resolutions for our health and well-being and passionately vow to make positive changes. With all this motivation and inspiration, have you spared a thought for how you can make a positive difference with your money? Your superannuation and other investments can be used as a force for good, if you know how. Here’s a quick look at the ways that investing ethically is good for you, and the world around you.
You can make money while doing good for people and planet. *
Responsible investing isn’t about being philanthropic, it’s about allocating your money for profit that benefits society and the environment at the same time. Ethical investing does not mean settling for lower returns. In fact, research shows that in general, there is no significant difference in returns between investing responsibly and traditionally. In many cases, sustainable investments perform better than traditional portfolios over the long-term. One reason is that ethical investing commonly involves buying shares in companies that have a longer-term view of their business. Their corporate models focus on a sustainable future (rather than quick profits), value the environment and communities that they operate in, and hence may have a reduced risk of controversies. This is all good news for investors like you when planning for your future.
You can diversify your portfolio and still avoid the issues that concern you.
There is an increasing amount of ethical investment products available. While in the past it may have been more challenging to allocate a portfolio across all asset classes, nowadays there are diverse responsible investment solutions. Some managed funds avoid controversial issues such as fossil fuels, tobacco, gambling, animal cruelty or human rights abuses by removing these ‘sin stocks’ from their portfolios. This can mean that their funds have a lower exposure to resources, mining or banking than traditional portfolios. This does not mean an ethical portfolio would lack diversification. It does mean that your portfolio has potential bias toward sustainable companies across a broad range of industries. Ethical investment products cover the spectrum of asset classes including equities, infrastructure and fixed income, as well as an international, domestic or blended focus. If you care about certain issues and don’t want to fund them with your superannuation or investments, then speak to your financial adviser about the ethical options available to you.
You can create an investment portfolio that supports the issues you care about.
Some ethical funds focus on companies that are leaders in sustainability or making real positive change for people and the planet. Funds may specialise in future-driven sectors and industries such as renewable energy, technology, education, healthcare or regenerative agriculture. While some investment products only incorporate sustainability themes, some provide mixed exposure and combine positive inclusions with negative company exclusions. In this way, you can both avoid issues that concern you and actively support the areas that mean something to you.
It’s never been as easy to achieve your goals while making a difference with your money, as it is right now. Ethical investing has grown considerably in the past few years. According to the latest report by the Responsible Investment Association of Australasia, responsible investing grew 13% in 2018 and made up 44% of all managed assets. This means that fund managers are listening to what you want, changing their offerings and developing new responsible investment solutions.
These are exciting times and you can make a real difference. What’s your investment new year’s resolution?
Want to know more?
Speak to me about how responsible funds may work in conjunction with your overall financial plan.
IMPORANT; This information is general in nature only it does not take into account your individual circumstances. We recommend that you seek professional advice before making any investment decision.
* Returns are not guaranteed.
Please call 08 8363 8810 or email pgarner@novowealth.com.au to discuss.
All the best
Paul Garner CFP®
Certified Responsible Investment Financial Adviser
This article was written in collaboration with Paul Garner of Novo Wealth and Alexandra Brown of Invest with Ethics
