In recent years, ethical investing or socially responsible investing (SRI) has become increasingly popular. Driven by the growth in demand for businesses that are profitable and ethical, along with regulatory frameworks to address challenges such as climate change and modern slavery, there has never been a better time to gain exposure to ethical investments.
With help from our experienced advisors at Endorphin Wealth, you can ensure that your money is invested in a way which aligns with your ethical values and principles.
What are Ethical Investments?
Ethical investments provide exposure to companies with strong environmental, social and corporate governance (ESG) structures and practices.
The Responsible Investment Association of Australia estimates there is almost $1 trillion invested in ethical companies and strategies across the country, equating to 44 per cent of the entire $2.24 trillion managed by professional investors in Australia.
Depending on your risk appetite, there are a range of ways you can invest ethically. You can put capital into an actively or passively managed fund with a focus on ethical investments. Your super fund may also offer investment options that focus on ethical leadership and business practices.
How to pick ethical companies
The research and analysis process for buying stock in ethical companies is broadly no different from regular stock picking. Analysing the typical indicators of financial strength is essential, including earnings per share, the price-to-earnings ratio and dividend yield. You will, however, need to weigh up whether a company’s approach to ESG aligns with your beliefs around important issues. These issues are typically environmental, societal, and political.
Getting financial advice is the best way to help guide you to the best options and investments available. Experienced financial advisors are aware of the many different options available and can tailor a portfolio which aligns with your preferences and ethical values.
Types of ethical investing
It’s important to note that the screening criteria for responsible investing are different from those used in strict ethical funds. As a comparison, strict ethical funds screen out specific industries such as energy, mining, gambling, pornography and narcotics as a default.
ESG investment funds differ by focusing on stakeholder engagement and shareholder activism to influence change in companies instead of simply divesting or eliminating the option of investing in particular organisations in the first instance.
Whether you put your money in a fund or decide to pick individual stocks to get started in ethical investing, you need to determine what you’ll look for in potential investments. You may look for companies that are carbon neutral, or those that have initiatives such as planting a certain number of trees each year.
Where to get more information on ethical investing
As always, it is important to take your personal situation into account. Whilst ethically investing in the right companies will offer better returns than money not being invested. It is important to incorporate other factors into your investment decisions, such as the return and risk. Endorphin Wealth is able to create personalised strategies taking into account your preferences and needs. Endorphin Wealth have many experienced financial advisors familiar with ethical investments and the options available.
For an obligation-free conversation about your financial future, please contact us on 03 9190 8964 or at advice@endorphinwealth.com.au.
The team at Endorphin Wealth are passionate about helping people achieve their life goals with great financial planning. We are not licensed or owned by big banks and financial institutions. So the advice and wealth management we provide is always in our client’s best interests. We have the advantage of being able to access a range of products from different providers. This means that our advice can be tailored to our client’s goals. We have offices located in Sydney and Melbourne, where you can find a financial advisor that is suitable for you.
