You are an ethical investor if you are interested in promoting positive corporate behavior with your dollars. Ethical investing incorporates your personal principles and values in the investment process. It entails an evaluation of the company’s actions against your moral code. Therefore, a company that does not align with your principles, ethics, and values is unqualified.
Ethical investment has been gaining popularity recently, with ESG assets growing by up to 30% annually. As investors and companies respond to this trend, more companies embrace transparent reporting that captures principled investors. As an investor, your goal should be investing in company shares that support social causes, help the environment, and set an example for corporate governance.
The decision to be an ethical investor is personal, and it is important to look behind the scenes at ethical investments to align with your desired impact. Read on to learn how you can properly invest in ethical stocks.
Define Your Objectives
The first step to investing in ethical stocks is defining your objectives. This includes stating your ethical values, financial goals, and what you care about. Generally, ethical investments lean towards being kind to others and protecting our planet. A defined objective will guide the corporate actions you will support.
Research Your Options
In building your portfolio, you can invest in individual stocks, mutual funds, or ETFs. Funds are diversified, making it challenging to match your ethical requirements. On the other hand, stocks will give you better control, though they have their share of management challenges.
You can get insight into your ethical selection, especially for funds that track an index. The research benchmark and fund documentation indexes are helpful research tools for exploring your options. ESG scores, news briefs, and company reporting are other valuable tools for finding and evaluating ethical stocks.
Measure The Company’s Humankind Value And Overall Impact
Investing in ethical stocks requires you to check how much good and evil a company is doing to the community. This way, you can invest more in the ones doing good and avoid the ones that harm people. If a company, for instance, pollutes the environment but offers employment to thousands of people, it lacks space in the ethical portfolio.
Also, while a company can fall short in treating its employees very well, if it produces more positive value for the larger society, its Humankind Value will be high and can be included in the impact portfolio.
While measuring a company’s impact, beware of greenwashing. Greenwashing is where a company promotes eco-friendly characteristics but in a misleading way. For instance, while promoting its sustainable practices, coca cola found itself under fire for being among the world’s largest plastic polluters. To protect yourself from greenwashing traps, check recent headlines for prospective stocks and their leaders.
Invest In Ethical Stocks
Measuring how responsible, ethical, or sustainable a company is can be challenging. Each company has its way of managing ESG issues, and investors have different beliefs on what makes an investment ethical. By defining your objectives and researching, you can match your interests with company priorities and make a smart investment decision.