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What is Ethical Investing?

Ethical investment traces it’s roots back to the 1970s, when faith-based organizations led a campaign to stop the flow of investment dollars that helped support the Apartheid regime in South Africa.

Today, ethical investment has evolved into ‘responsible’ investment, where traditional financial analysis is integrated with social, environmental and governance analysis.

This is a ‘triple bottom line’, not just a financial bottom line, and recognizes that investors are able to express their values – their concern for the environment or their communities –  through their choice of investments.

Ethical investment therefore allows you the opportunity to screen your investments to avoid companies whose activities you do not wish to support, while also considering investment in companies whose practices and values you wish to encourage.

This approach to investment has gathered great momentum in recent years, as public pension managers as well as individuals and other institutions recognize that companies that responsibly address their environmental and social risks are likely to be more sustainable and healthy businesses.

Indeed a common misconception that ‘ethical’ investment might result in sacrificing returns has been widely discredited. Companies that address environmental risks are of course more likely to avoid costly litigation, and they generally build much greater goodwill with their customers.

In addition, trends towards cleaner technologies, energy efficiencies, and healthier foods are not fads that will one day disappear, and can therefore make good strategic, long term investments.

There is today a wide range of options for responsible investors. Besides ownership of specific stocks or bonds, investors can consider low-cost exchange traded funds (ETFs) that target clean energy companies, or mutual fund companies that actively engage in dialogue with corporations, on behalf of their investors, to effect positive social and environmental change.

Ethical, or responsible investment, is now a mainstream approach to investing that recognizes by managing risks and engaging in responsible business practices one can accomplish more than simply creating wealth – one may also help create a better world.

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