Ethical investing is the activity of selecting assets based on ethical or moral values. Morally minded investors frequently shun sin stocks or companies that participate in stigmatised activities like gambling.
In addition to evaluating the company’s commitment to ethics, ethical investors also assess its history and current and future performance.
Demand for ethical investment is rising as more people choose to align their investments with their values. However, it’s tricky to know where to begin when making your investing ethical, as there are no set rules or procedures.
Moreover, ethical investments based on ethics do not guarantee a high return in performance. The ethical credentials of many products also differ substantially.
So, before you start any ethical investment, do your homework and know what you’re investing in. Here are some well-known ethical investment options in Australia.
1. Build Your Investment Portfolio
You can build your ethical portfolio by purchasing shares or bonds that you feel align with your ideas and values.
However, selecting them and keeping track of their performance and green credentials can be time-consuming, but it will result in a tailored selection of assets that match your notion of what is “ethical.”
2. SMSF or Self-Managed Superannuation Fund
Your superannuation provider may not provide products that meet your needs. Therefore you may want to consider a self-managed superannuation fund (SMSF) instead.
SMSFs are like Registered Retirement Savings Plans (RRSP), but they differ in some aspects. Unlike other funds, SMSF members are frequently trustees. The SMSF’s members are responsible for following superannuation and tax rules.
An SMSF gives you more control and transparency over your assets. However, an SMSF may be more expensive to establish and administer than a traditional super fund, and it comes with legal restrictions.
While it’s beneficial to utilise your SMSF, you’ll also need time and expertise to manage your finances effectively. For this reason, always seek the counsel of a financial planning expert while administering your SMSF.
Future Super, Verve Super, and Australian Ethical Superannuation are all devoted to ethical investing. Companies that don’t fulfil their ethical requirements are supposedly deliberately sought out by these funds. Do your homework and discover what’s included and excluded in ethical SMSFs.
3. ETFs or Exchange Traded Funds and Managed Funds
Investing in a managed or exchange-traded fund (ETF) exposes you to ethical investing. Several Australian funds claim to be ethical, responsible, and sustainable investments.
Most of these funds use an ESG (Environmental, Social, and Governance) investing strategy. A company’s financial performance is weighed against its exposure to ESG concerns. However, some critics argue that the technique is not an “ethical investment” since it prioritises financial returns over ethical considerations.
If an ESG fund seems viable to you, make sure the fund’s underlying assets and ESG screening criteria correspond with your principles. A fund that actively includes or eliminates investments is ideal for those who desire a more aggressive approach.
Conclusion: Hire a Financial Advisor to Guide You Through
Even though ethical investment is currently a small part of the overall market, it is rising quickly. If you’re serious about ethical investments, you should see an expert financial planner.
An ethical investor can help you build a financial plan, recommend products, and ensure that your investments not only reflect your values but also meet your long-term financial goals.
A wide range of ethical investing options are available, and what is ideal for you is a personal choice. Before investing, consider your values, financial goals, and risk tolerance. In addition, consult with a financial advisor who can assist you in your sustainable investments.
New Wave Financial Planning is a financial advisory firm that can help you manage your sustainable investments in the Gold Coast. We also offer superannuation advice, budgeting and cash flow, estate planning, retirement planning, building wealth, and insurance. Contact us so we can help you handle your investments more sensibly.
