For many people, investing conjures up images of oil tycoons and Wall Street traders, but it’s not just for the super-rich or those who work in finance. The truth is that ethical investments – which include socially responsible mutual funds and exchange-traded funds (ETFs) – can be very useful in building wealth over time, even for investors with modest budgets.
Ethical investments are not only good for your peace of mind, but they’re also good for the world around you as well. Here are some examples of ethical investments and why they matter to you and society.
Sustainable energy
We now know that fossil fuels contribute to global warming, and it is increasing and generating electricity. The renewable sector will be able to meet the increasing demand for electricity shortly. Wind and solar are the two most popular types of renewable energy.
They work by converting natural energy sources into electrical current, which can then be converted into heat or light. This renewable energy sources emit no CO2, which causes global warming or acid rain, making them a much more environmentally-friendly source than traditional fossil fuels.
Charitable donations
There is a long list of worthy charitable organizations that you can donate to help promote their cause and contribute in a significant way. Giving back and helping those in need is good for your health and well-being and positively impacts society. You will find many organizations with different causes worth giving money to, including animal welfare groups, environmental protection agencies, educational foundations, and business networks. You don’t have to be wealthy to make a difference; all donations go toward helping others and making the world better.
Donate your skills
Today’s consumer is more socially and environmentally conscious than ever before. Studies show that 78% of consumers expect businesses to lead in developing solutions to address social and environmental issues. Businesses need to understand the needs and values of their target market and adapt accordingly.
“Invest ethically” helps you identify those companies that create products, services, or investments that generate measurable benefits for society, such as quality jobs, safety in the workplace, economic stability, and good stewardship of the environment while balancing financial performance.
Buy used products
One of the best ways to be an ethical investor is to buy used products, preferably from second-hand shops. The benefits include supporting the local economy by not taking resources elsewhere and reducing packaging waste. One study showed that people who frequent second-hand stores make more informed purchases than those who don’t shop at thrift stores and have access to various styles and items. On top of this, it’s estimated that used-goods sales generate four times as much income for charities as selling new goods, so it is a win-win situation.
Green bonds
This can be particularly important for investors who need long-term returns to remain competitive, like pension funds and charities. Additionally, these funds can have a positive impact on the environment while still generating an adequate financial return.
Investors should consult with a professional before purchasing green bonds. This is because they are considered alternative assets that are not yet well understood by most mainstream investors.
There are two main types of green bonds: solar energy projects that fund themselves through utility bills; and private infrastructure projects (like pipelines) that receive low-interest loans from the bond issuer.
Other things to consider when investing ethically
- Social Responsibility – Are the company’s practices aligned with your values and beliefs?
- Environmentally friendly – Do they use environmentally sustainable practices that you can support and promote?
- Employee well-being – Does the company offer competitive wages, healthcare, and retirement plans for their employees?
- Diversity – Does the company have a diverse representation on its board of directors or work with organizations that represent diverse voices like historically marginalized communities or women leaders?
Conclusion
Choosing to invest ethically is a choice. It’s hopeful that by putting these options in front of you, you will make an informed decision on what investments suit your needs best. With careful consideration and planning, it’s possible still to access the opportunities available with traditional investment practices while also considering sustainability. The possibilities for ethical investing are endless; you are encouraged to explore the provided examples for more ideas.
