What are the Best Ethical Investments? – Ethical investment is about making conscientious choices with your money. This often involves excluding certain sectors or industries that you feel are unethical — for example, companies that produce weapons, tobacco, gambling products, or animal testing products.
It also involves screening for other types of businesses that have proven to be more ethical in their operations and practices — for example, renewable energy companies, companies that support social good, and others.
In general, there are many reasons why someone would make an ethical investment decision. Some people may want to exclude certain sectors from their portfolio because they personally find them reprehensible (e.g., gun manufacturers). Other people may want to include different sectors in their portfolio because they align with their personal principles (e.g., renewable energy).
And still, other people may want to do so simply because it’s a good way of achieving diversification in your portfolio and lowering the risk associated with one type of stock you own (e.g., a mining company).
If any of these apply to you, read on for our ultimate guide on how to invest ethically.
What Is an Ethical Investment?
An ethical investment is any investment that you choose because you believe the company or stocks you are investing in are ethically and/or socially responsible. This means avoiding certain businesses and sectors that you feel are unethical and including certain businesses that you feel are socially responsible or ethically acceptable.
If you’re looking to make an ethical investment, your first step is to decide exactly what you mean when you use the term “ethical investment.” Are you looking to invest in companies that are good for society? Are you looking for companies that are environmentally friendly? Are you trying to avoid investing in companies that produce weapons or other harmful products?
Most ethically minded investors try to follow a combination of both approaches. They want to avoid certain industries but also include certain industries in their portfolio. It’s important to note that ethical investment is not something you do on its own — it’s something you do alongside your regular investment strategy.
Examples of Ethical Investments
There are many different types of ethically minded investments, but most fall into one of three categories: clean energy, socially responsible companies, and socially responsible funds. Let’s take a closer look at each of these so you can better understand how to invest ethically.
Many people interested in clean energy look for companies that produce renewable energy, such as solar or wind power. Other people prefer to invest in companies that develop and/or manage clean energy infrastructure, such as power plants.
If you want to invest in companies that produce clean energy, you can look for renewable energy stocks on a stock screen. If you want to invest in companies that manage clean energy infrastructure, you can look for companies that build and manage power plants.
Socially Responsible Companies
Socially responsible companies (SRCs) are companies that focus on positive social impact, rather than profit maximization. Some examples of SRCs are companies that produce organic food, companies that provide financial services to underserved communities, and companies that produce green household products. To find SRCs, you can look at screening services and social impact reports.
Socially Responsible Funds
There are many different socially responsible funds (SFFs), but they all have one thing in common: they invest in SRCs, rather than traditional stocks.
There are many different SFFs on the market, some of which focus on specific industries, such as healthcare. Before you invest in any fund, make sure you read the fund’s investment strategy and know exactly what you’re investing in.
The Bottom Line
Making an ethical investment is about more than just choosing stocks that align with your values. It’s also about avoiding certain sectors and industries that you feel are unethical — for example, companies that produce tobacco, gambling products, or harmful products.
That said, it’s important to research which companies are best aligned with your values before making an ethical investment decision.
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