If you want to build your wealth in a way that will also benefit people other than yourself, consider ethical investing. Also known as sustainable investing, this trend has been around for decades but has only recently become mainstream.
This does not constitute advice and advice should be sought in all instances before acting on it. The Financial Conduct Authority does not regulate tax advice.
More money is being invested ethically and technology has made it even easier and more accessible than ever. But if you’re new to the concept, it can be a bit daunting and hard to follow all the jargon associated with the practice or even know where to begin.
Where do you want to invest?
The first thing you should do when considering ethical investing is to decide what areas you want to focus on.
Look to your personal values and what you want your money to help achieve. If you’re not sure exactly what companies you want to invest in, think about the sectors that you’re interested in.
- Do you simply want to avoid stocks from problematic areas like weapons, tobacco, alcohol, or oil?
- Do you want to select companies with a good ethical, social, and governance (ESG) rating?
- Maybe you want to invest in companies that back certain causes like climate change or clean water initiatives?
- Perhaps you’re interested in businesses with a track record of supporting charities and treating their workers well?
Once you figure out how you want to invest you can select companies that reflect your values.
How do you find out if companies meet your criteria?
Just like with any other new investment, you need to do your research. Most companies have a public policy on corporate social responsibility (CSR) or have a statement about sustainability available on their website and in their annual report. You can also look online for news articles and reports about the companies you’re interested in.
There are also tools designed to help you vet potential investments and financial advisers that specialise in ethical investing which can be found via the Ethical Investment Association.
Get the lay of the land
With any new endeavour, you should learn the basics and understand the risks. With all investments, your plan should be long-term and one that takes you through the ups and downs of a volatile market. As with any investment, your attitude toward risk will play a big part in how you choose to invest. If you’re already working with a professional adviser or asset management company, you’re already a few steps ahead of the game as they’ll help you make decisions that align with your values.
Not everything is black and white
In the corporate world, you would be hard-pressed to find a company that’s completely clean – at least when it comes to corporate responsibility; there will be some grey areas. Maybe they’ve focused aid in one area you’re interested in but have historically supported something contrary to your beliefs. It’s up to you to decide what you’re comfortable with.
Ethical investing is growing in popularity, so there’s no better time to get started. Once you’ve decided what to focus on, which is often the hardest part, you’ll have a clearer picture of how to get started. Investing in ways that are beneficial for others, society in general, or the planet doesn’t have to be hard.
Reach out to your adviser if you have any questions or if you’d like to get started with sustainable investing.
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