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Ways to Invest Ethically

4 October 2012 3 Comments

Money and ethics don’t always mix. But with growing consumer interest in sustainable development, environmentally-friendly business practices, and corporate responsibility, there has been a surge of demand for ethical investment strategies. If you want to find a way to grow your financial security by supporting ethical businesses, you can benefit from this recent spate of ethical funds. The word “ethical” can vary. Some of these investment funds will screen out businesses involved in animal testing, for example, while others will ban nuclear energy or tobacco companies. It’s important to find investment opportunities in line with your own sense of ethics.

Find an Ethical Investment Adviser

When just getting started with finding mutual funds and individual companies to invest in, it’s helpful to find an adviser to guide you. There are now many large private banking firms that specialize in this. Lombard Odier is one example, taking sustainable development into account when choosing investments. They take a blend of environmental, social, and governance risks into consideration when looking at stocks, and can help individual investors choose products that meet responsibility requirements. The best advisers can guide you in the right direction towards finding mutual funds dedicated to the best environmental, social, and ethical practices.

Conduct Your Own Research

In addition to using information provided by financial advisers such as those at Lombard Odier, you may also wish to conduct your own research. When comparing mutual funds that claim to be responsible, find out what their specific criteria is regarding filtering out businesses. Some will filter out businesses with a poor environmental track record, but may not take animal testing practices into account, for example. Not all of these ethical funds address climate change, either. The best mutual funds will seek out companies making a difference in areas such as healthcare services and clean fuels, rather than simply blacklisting the worst offenders. Finding out more about their holdings and philosophy will drive you in the right direction when combined with recommendations from your financial adviser.

Take Performance into Account

It’s natural that ethical funds might bring in smaller returns than funds free to invest with only performance in mind. This doesn’t mean that you should ignore performance when choosing your investments, however. Be sure to research how a fund has performed in the past. Although this will not guarantee the same rate of return in the future, it will give you something to base your decision off of. Your financial adviser can help you with this aspect of ethical investing. Once you have made your initial investment, monitor your portfolio’s progress regularly.

Choose a Self-Invested Pension Plan

A self-invested pension plan, or SIPP, allows you to choose your own investment funds. This means you can invest in ethical funds while preparing for your retirement, rather than being locked into a less-than-ethical traditional pension plan. There are also pension companies which claim to offer ethical funds, if you are uncomfortable choosing your own.

These are just a few ways to start taking responsibility for where your money is going. Seeing returns on your investment and watching your money grow over time will be even more satisfying when you know you’ve been supporting businesses with ethical practices. With the help of a qualified financial adviser committed to responsible investing, you can find out more about what you need to do to grow your ethical portfolio.

 

3 Comments »

  • Steve said:

    I'm actually surprised that people still encourage ethical investing. That is honorable

  • Ron Rbins said:

    I'm glad to see you covered ethical investing.

    Surveys all-over-the-world show that most investors want to invest in ethical companies and don't want their investments being the cause of grief to others. Then since so many of our core values are alike — and are supportive of higher ideals — that in the long run, only companies employing these higher values will likely prosper.

    I've been following ethical investing for some forty years.

    In 2003, I founded a site to educate investors about ethical/socially responsible investing. According to Google rankings is one of the world's most popular sites on this subject

    It covers the latest related global news, research, books, links, articles, etc. It's at http://investingforthesoul.com/

    Best wishes, Ron

  • Aram Durphy said:

    I would also add that I recommend searching for a fee-only ethical advisor. Fee-only advisors have fewer conflicts of interest than broker's or fee-based and commission-based advisors. That means your assets will often perform better, and you'll pay less in fees.