Over the past few years, the number of people getting behind ethical investing has increased significantly.
In the latest Responsible Investment Association Australasia (RIAA) annual benchmark report, responsible investing was found to have more than quadrupled in the last three years.
That’s massive growth driving a lot of money into companies either in Australia or around the world that contribute to a better future.
Ethical investing can be a really smart way to boost your savings.
Challenging the misconception that ethical funds don’t perform well in terms of making you money, RIAA’s annual reports have consistently found that responsible funds actually tend to perform better than mainstream funds over most time periods.
So that means you don’t have to compromise on performance or the returns you receive when you align your investments with your values.
What do you need to know about ethical investing?
There are different types of ethical investing, but put simply it means your super or investments can be put into companies that have met certain criteria.
There are ‘broad’ responsible investment approaches, which take into account environmental, social, corporate governance
(ESG).
Or, there’s ‘core’ responsible investment approaches, which take into account strategies like negative or positive screening, sustainability-themed investing or impact investing.
If you’re interested in ethical investing, you’ll need to start off by considering your own personal values.
Of course, no two people’s values are the same, so ethical investing means different things to different people.
For example, you might be really passionate about the environment, and therefore you’ll probably want to choose a fund that doesn’t invest in companies that support the fossil fuel industry, which is called negative screening, and instead seeks out investments in companies that develop renewable energy solutions and that’s called positive screening.
Or, if you feel like you are most deeply affected by humanitarian issues, it’s likely you’ll want to make sure your fund doesn’t invest in a company like Broadspectrum (formerly known as Transfield) which runs detention centres on Nauru and Manus Island in Papua New Guinea.
So, when the performance of the funds provide returns to you that are the same if not better than traditional funds that might invest in companies that aren’t aligned with your values, why would you want to support unethical companies, when you could be supporting better business models of the future?
