In his book, The Clean Money Revolution, Joel Solomon states that this is the time to talk about money in ways that make it subject to human standards of love, decency, and ethics. And this statement is entirely true in matters of ethical investing.
Ethical investing can also be called intelligent investing. It is, at its core, value investing, where an investor acquires more than they are paying for. And a company cannot offer such value without first valuing its business to value the stock and have the results trickle down to investors.
Finding rewarding ethical funds can be challenging, especially when factoring in the ethical factors and profitability. But basically, the best way to choose an ethical fund is to factor in your moral code. Then, as a result, you put your money into companies that positively influence society and the environment.
There isn’t a single strategy to work for everyone since the definition of ethics varies between individuals. So, it is important to create a personalized plan for your investment portfolio to support only the companies whose principles and operations align with your values.
Although investing in ethical funds greatly depends on your values, here are some best ways to incorporate ethical funds into your portfolio. Besides, if you want to learn about sustainable funds, you can find more here.
1. Research
Thorough research is a game-changer in how people choose investments. For example, consider the following research areas on an ethical fund.
Sustainability
Sustainable businesses are companies whose focus is on renewable resources. Such businesses reuse or recycle products to reduce the planet’s natural resources burden. The good thing is that these companies are rapidly increasing as more people start embracing them and acknowledging their benefits. Sustainability often goes hand in hand with green investing. They both focus on the environmental impact of companies within an ethical fund. So, ensure that an ethical fund comprises sustainable companies.
Social responsibility
The best ethical funds to incorporate into your portfolio should feature companies that observe social responsibility through fair trade. For example, such companies could be female-owned or pay their employees livable wages. So, it is essential to look for companies focusing on the social issues you consider important.
Governance
Governance covers the management of an ethical fund and whether it aligns with your values. Some issues to check are the diversity of the board members and the ethical fund’s responsiveness to shareholders.
2. Check Company Backgrounds
A company’s background can shed light on its ethics and values. So, check the internet for resources with such information or reviews about the company. For example, if the company’s background is marred with instances of sexual violation or harassment at the workplace, unfair remuneration, worker exploitation, or failure to observe labor rights and human rights, the company may not be a viable ethical investment opportunity.
You can find such information online or ask friends and family their opinion about a company and see where the company stands.
3. Choose How you Want to Build a Portfolio
There are two ways to build a portfolio. First, you can build the portfolio on your own. In this case, incorporate the ethical funds you identified from research into your portfolio. This option allows you to manage your portfolio and invest only in the companies that are right for you. However, learning how the market works is dynamic and time-consuming, especially if you have not invested before, and it may take some time before getting tangible returns.
The second option is to invest in ready-made or managed portfolios. In this case, an investment manager chooses the ethical funds and is responsible for the entire process. If you are new or don’t have time to learn about the market but still want to control where to put your money, this is the best option to incorporate ethical funds into your portfolio. However, the disadvantage of this option is that you have to accept the manager’s ethical choices, and you cannot add specific investments.
Conclusion
The best way to incorporate ethical funds in your investment portfolio is by researching to find companies that adhere to ESG because they are more ethical and have the potential to offer significant returns and minimal risk. In addition, you can choose the do-it-yourself option, the ready-made option, or both to diversify your portfolio.
