When it comes to investments, it’s important to ensure your money goes to the right place. But this doesn’t just mean deciding solely on the financial benefits an investment can offer.
You may also want to consider the social responsibility behind the investment you’re wanting to make. This simply means to ensure your money isn’t being invested into something that does more harm than good.
This is the essence of responsible and ethical investing.
What Is a Responsible and Ethical Investment?
In general, a responsible and ethical investment puts into consideration the environmental, ethical, governance, and social impact it can have.
This often means screening out sectors or companies that have a negative social impact or unethical practices. Investments you may want to consider avoiding include those that have a history of worker exploitation and human rights abuses, selling harmful products or participating in animal testing.
To learn more about making ethical investments, check out our blog: Making Ethical Investments With an Ethical Financial Advisor.
Different Levels of Responsible and Ethical Investing
It’s important to note that there are different levels of responsible and ethical investing.
- You can have an investment portfolio that only invests in companies that uphold the Environmental, Social, and Governance (ESG) Criteria through a dark Green Fund.
These investment options take on a highly restrictive approach to ensure that unethical companies are excluded.
2. Next, there are the light green or sustainable options, which focus more on social responsibility.
Light green options don’t exclude entire industries, but the investments would only go to the most responsible businesses in those industries.
With these investment options, the exclusion of investments is based on the negative or harmful activities they conduct.
3. Lastly, there’s impact investing. In this type of responsible investing, investors proactively seek out companies that can help address social and environmental issues.
Investors provide capital to the companies so they can generate not just financial returns but also a measurable and beneficial impact on society or the environment.
How Does a Responsible and Ethical Investment Affect Returns?
One of the biggest concerns when it comes to responsible and ethical investing is that the investment performance may be compromised due to the whole screening process.
However, investors can rest assured of their ethical investments because studies show that the assets under a responsible and ethical investment approach outperform the mainstream funds.
How to Check Your Responsible and Ethical Investments
You may want to start by determining what ethics and values you find important. This can help you figure out which areas you’d want to invest your money in and which ones you would like to avoid.
When examining different investment options, it’s important to ask where your money will go. This can help ensure your money is being invested in the right place.
You may want to consider doing your own research to help you decide on the right investments or seek assistance from a professional.
Novo Wealth offers one-on-one financial advice for people who want a secure, professional and ethical plan for their finances in an effort to make the world a better place.
Responsible and ethical investments don’t just consider the financial returns. They also put into account the social, environmental, and ethical impact they can have. This can provide you with the assurance knowing that your money is being put to good use.
Get more ethical investment advice from Novo Wealth. We are the ethical financial advice specialist for professionals and business owners who want to invest responsibly. With Novo Wealth, you can find out how you can take the ethically responsible path to financial peace today.