Ethical Investing: Secure Returns For A Better World. In the ever-evolving landscape of investing, ethical investing has become an important aspect. In this article I wanted to discuss the nuances of investing ethically.
What is an Ethical Investment?
An ethical investment prioritises both financial returns and positive social and environmental impact.
It’s right to invest when you want to align your financial goals with your personal values, supporting industries that make a positive contribution.
Recent Developments
From changes in government pledges, the cost-of-living crisis, the unsettling backdrop of war and geopolitical tensions, the ethical landscape has faced its fair share of challenges. This has unfortunately resulted in ethical investments having an increase in volatility, when compared to an investment that isn’t ethical.
Some of the ‘winners’ from the recent issues over the last few years include armaments and oil firms, which, due to their nature, are excluded from ethical funds.
Additionally, many ethical investments focus on growth companies. These companies can be adversely affected by high inflation and rising interest rates because of the potential impact on future earnings.
What’s Next?
Once the talk of the town, it seems the initial excitement has cooled, but this can happen with any trend. Does this mean ethical investing has lost its spark, or is it simply finding its place among the established players? Only time will tell.
Ethical investments may be recalibrating towards a more sustainable future. Something that follows the long-term investment trends of its brothers and sisters of the non-ethical world.
We may be seeing a shift in how people invest ethically, ethical investments, once the shiny new toy on the block, may now have become part of the furniture. But is that necessarily a bad thing? Being part of the furniture is a sign of maturity and can come with a move to lower volatility.
Is It Right for You?
There are two types of investors, those who invest ethically for ethical reasons, and those that invest ethically for performance reasons. It’s the performance chasers that will sell an ethical portfolio to invest in a non-ethical portfolio, so it’s important to decide where you fit. Ideally, you would invest ethically for ethical reasons, as this allows you to focus on the longer-term investment plan.
Ethical investing isn’t a one-size-fits-all solution. It’s about where your values align with your financial goals.
- Do you feel strongly about investing in line with your values?
- Is performance more important than how you invest?
- How much risk are you comfortable with?
- Are you OK with a potential for increased volatility to invest in line with your values?
Despite recent challenges and volatility, ethical investments are evolving towards sustainability. It’s crucial to align personal values with investment goals and assess risk tolerance for a tailored approach to any investment.
