Ethical investment

Ethical Investment Strategies to Implement - R1Investing

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:

  • Government-controlled funds;
  • Mutual funds and ETFs;
  • Separately managed accounts;
  • Shareholder advocacy;
  • Community investing.

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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r1investing provides an optimized way to strengthen investment portfolios and enhance trading techniques. Join us to discover the diverse world of trading.
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Written by:
Omer Aragón Godínez

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