Known by several names including socially responsible investment,
sustainable investment, and even socially conscious investment, ethical
investment is a model of making investments that benefit a trader
financially and the world or society at large.
Ethical investments allow individuals to support businesses that adhere to
their principles, beliefs, and values. Some investors may choose the medical
- physical and mental health - field, some decide to allocate funds for the
support of environmental protection, or social equality, some pursue
religious or political causes.
Traders interested in ethical investment may invest ethically in several
ways. They may desire to encourage corporations to act for a positive
change, for example in the environment or dealing with human rights.
Investors might do this by writing letters and showing up at board meetings
hoping to persuade the corporations to follow an ethically sound approach in
business dealings. This is called shareholder activism.
Or, socially driven investors might try to influence asset managers to
invest in portfolios in a socially responsible way. Of course, those who
consider ethical investment important are generally fulfilling or working
towards their own definition of ethical or sustainable. It’s possible
that one group of ethically driven investors wouldn’t invest in
pharmaceutical companies that produce contraceptives, while other equally
committed ethical investors might push for better and less expensive
contraceptives as a way of boosting women’s health.
What type of investments do your ethical plans contain?
Other ways traders might try to influence investments are by choosing to
invest in socially committed funds that are set up to withhold certain
ethical standards, or by deciding to refrain from investing in any business
that is involved in practices they deem unethical such as relating to
tobacco, fossil fuel, military, or alcohol.
To invest ethically, individuals or companies have to analyze the
organization’s history, legal documents as well as current projects to
determine whether the mission is focused on the same ethical standards as
the investors pursue.
There is a number of strategies working for sustainable investments:
The history of socially responsible investing
The tenets of ethical investment dates back many years, with some suggesting
it began with the Religious Society of Friends, also known as the Quakers,
who in 1758 banned members from taking part in the slave trade. Ethical
investing became more widespread in the 1960s, with the growth of several
social movements including labour and civil rights and equality of women.
While working for social change, healthy working conditions and
environmentally friendly actions, for example, those participating in
ethical investment practices also hope to maximise their financial return.
Ethical investing is not the same as giving charity or donating money to
worthwhile causes. One oft-used socially responsible investing method is
divestment, which is the removal of
stocks
for funds from a portfolio based mostly on ethical decisions.
Positive investing is a newer approach to ethical investing. As the name
suggests, it involves investing in companies or activities thought to be
bringing about a positive social effect. Impact investing is another
approach to ethical investment. It can be defined as investing in particular
social objectives in order to reach financial gain, and then measuring how
well that investment fared in both regards, how well it achieved its social
impact and how well it did financially.
While the majority of today’s investors may still prefer to invest
according to financial criteria, socially driven investing may very well be
an approach that is here to stay.
Make ethical investments
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