It can be challenging to determine which investments are ethical, especially if you’re unsure what impacts they will have on people and the environment. Fortunately, there are plenty of ways to figure this out.
Once you’ve made your choices, it will help to monitor them so that you can make any necessary adjustments in the future as issues may arise and need your attention or input to rectify them.
This guide will take you through various ways to determine which investments are ethical.
Make sure you do your homework
When you invest in a company, you’re giving them money to help them grow and make more of their products. To know if the investment is ethical, you must take the time to research what they do and how they do it.
- Find out if they have any negative environmental impacts.
- Find out if they violate international human rights laws or child labor laws.
- See if the company has been accused of violating antitrust laws in the past few years.
- Check for complaints about the company, such as violations of consumer protection laws or deceptive marketing practices.
- Consider whether the company violates fair trade regulations.
- Find out if there are any controversies surrounding the company.
Use socially responsible funds (SRI)
Investing in socially responsible funds (SRI) is one way to ensure you’re not putting money into companies that do things you don’t agree with. SRI funds have a set of specific criteria that determines what investments they’ll take part in, and those criteria vary from fund to fund. For example, some will only invest in companies that produce goods or services without causing harm to the environment or society. Still, others will also include social justice and human rights as criteria.
Research each stock individually
Researching each stock individually will take a lot of time, but it will ensure that the investment is ethical. Once you have researched the individual stocks, you should look at the bigger picture. Check if any of your investments have large stakes in other unethical companies. You can find this out by doing some online searches on their websites or googling them.
Diversify across sectors and countries
Another means of knowing which investments are ethical is by diversifying across sectors and countries. When you have a portfolio of the same investment in multiple sectors, you can feel confident that if one sector falters, another may pick up the slack. The opportunity for success will be greater than with a concentrated portfolio.
Additionally, investing in companies from different countries helps shield your portfolio from currency fluctuations and geopolitical concerns. For example, if there is a trade war between the United States and China, your US-based company might take a hit, but your company from Japan or Taiwan may not.
Avoid investing in fossil fuels
Fossil fuel is one of the world’s largest and dirtiest industries. Not only do they pollute our air, soil, and water, but they also contribute to climate change. Even if you’re not a scientist, it’s easy enough for anyone with an internet connection and a conscience to see what kind of destruction these companies are causing. So you might wonder why anyone would want to invest in them first. The answer is simple: money.
Keep an eye on companies moving into new ethical markets
While some businesses may move into a new ethical market only for public perception, other companies may genuinely care about their impact on society. Watch out for companies that have recently made large investments in sustainability. Though investing in sustainability may not be enough to make an investment ethical, it’s worth watching which companies invest in areas that align with your values.
Consider mission-related investments
It isn’t easy to know how investments affect the world at large. If you’re unsure, consider mission-related investments that align with your passions. These might include fair trade, organic products, or renewable resources. While these will usually be more expensive than other options, they can give you peace of mind that your money is going toward something good for the world.
Deciding what investments are ethical can be a challenging and confusing process. It’s recommendable that you start with these steps to help you determine which investments are ethical.
Remember, everyone is different, so this won’t work for everyone. You’ll have to figure out what best suits your needs. In the end, it’s up to you how much of your investment portfolio is invested in funds or stocks from any company or corporation.