Ethical investing entails aligning your money with your values. Investors in this field focus on environmental, social, and governance (ESG), making the world a better place.
Besides contributing to the overall interest of the earth, ethical investments also have a good business sense. The idea behind their good performance is the good treatment of employees, which can result in improved productivity. A company with strict adherence to ESG will also avoid lawsuits and other issues that could cost their organization and invest in growth.
Read the rest of the sections for more details on how to start your ethical investment portfolio.
Define Your Values
Defining your values before choosing an ethical investment portfolio should be your first step. This will involve identifying what you care about. The golden rule, in this case, is to care for humanity and the environment.
While defining your values, you should also state what an ethical investment means. For instance, if you want to invest in coal production, you may want to know if this investment will still be ethical with its environmental effects. Identifying the industry you want to venture in, the ones you want to invest in, and those you want to avoid makes settling on investment much easier.
Prioritize Building an Ethical Investment Portfolio
Upon identifying your priorities, you can now build an ethical investment portfolio that aligns with your ethics. The process starts by reviewing materials from independent research firms to understand how well a company can score in ESG investment. Linking up with experts in this field will also guide your investment decision.
Where you lack adequate time to conduct reviews on the portfolios, you could partner with like-minded investors who will help with the research on human impact and reach companies on your behalf to encourage them to improve on human value.
An ethical investment portfolio comprises stocks and funds, among other options. Generally, limiting your portfolio to individual stocks is good, but you can give special consideration to a company with promising performance. Some companies will provide a sustainability report on the initiatives they have taken on and their environmental impact. Still, you should also check how employees in such companies rate their organization’s culture through independent sites.
Mutual funds offer portfolio diversification, and you can choose from multiple options. You can invest in these funds with respect to ESG factors or other relevant tools.
Whatever ethical investment portfolio you pick, getting a financial advisor with an ESG background is necessary to put your investment into perspective. Advisors with such backgrounds will also shed light on handling unique situations and the stocks you should or should not pursue to ensure an optimal investment in social good.
Ethical investing aims to improve the world with its impact spreading to the persons involved and the environment. The journey requires identification of your ethics in line with ESG factors, after which you can liaise with a team of experts on the portfolio to pick. You can have a successful investment with proper research and support from experienced advisors.