Can you meet your financial needs while also staying true to your moral values? There is a common, rather cynical belief that money matters are inherently detached from ethical considerations, but this is simply not true. You can build a responsible portfolio, stay true to your conscience and enjoy good returns, through ethical investing strategies. This blog will take you through the fundamentals of ethical investing and its benefits, and explain how you can develop an ethical portfolio.

What Is Ethical Investing?

Ethical investing is an investment strategy in which the investor places ethical values at the top of their list of objectives. Many investors are starting to insist that the companies and instruments they invest in are based on values that are socially and environmentally responsible. Effective ethical investing requires some investigation into investment targets to carefully vet products, employees, production practices, environmental policies, and funding sources. 

Good Examples of Ethical Investments

Ethical investors want to invest their money in good causes, or at least avoid targets they deem harmful or unethical. For example, someone who is committed to environmental causes will only want to invest in businesses that show a strict commitment to green and sustainable practices. 

How to Develop an Ethical Investment Portfolio

Developing an ethical investment portfolio takes quite a lot of homework. Rather than simply investing in companies or funds that seem likely to yield good returns, you need to find businesses, instruments and funds that operate according to your ethical standards. You can work with your wealth advisor to determine the best investment options. If you are not investing directly in companies, you can choose from a range of ethical investment funds that are expressly designed for ethical investing. These include:

  • Socially Responsible Investing Funds (SRI Funds)
  • Environmental, Social, and Governance Funds (ESG Funds)
  • Impact Funds
  • Faith-based Funds

Benefits of Ethical Investing

Ethical investments provide at least three substantial benefits:

  • You, as the investor, can rest assured that you have put your money into an ethical enterprise. When an ethical fund performs well, you get both financial and emotional benefits.
  • As like-minded investors choose the same ethical funds you have, these investments will grow substantially.
  • As ethical investing gains in popularity, it will encourage other businesses to improve their practices and operate more ethically.

It is also important to consider the potential drawbacks of ethical investing:

  • Ethical investing involves a lot of homework and investigation to ensure that the investor selects the right funds and companies to invest in. Further, the rise of ‘greenwashing’, the practice of labelling investment funds as ‘ESG-friendly’  whilst offering little in the way of ESG investment strategies.
  • In most cases, ethical investments may not provide optimal returns, meaning that investors have to sacrifice some of their financial gains for their ethical values.
  • Due to the additional work involved, the fees for ethical investing tend to be higher than those charged with conventional investments.

Momentum Wealth of Aligned Capital Partners Inc. is a boutique wealth management and investment planning firm based in Georgetown, ON. We are here to help our clients with their unique investment objectives and approaches. We provide excellent high-net-worth wealth management services for individuals and families, and we would be delighted to help you formulate a robust, ethical investing strategy.  Contact us to find out more about our services and what they can do for you.