Listen Up, Here’s Everything You Need To Know About Ethical Investing

By Emma Edwards
24th Nov 2020

a woman lays in a green field of yellow flowers. She hold a flower in front of her face.

Investing has become the talk of the town lately, and it’s no wonder. Instead of leaving your money to slack off in a savings account with a 0.8% interest rate, investing can put your dollars to work for you. Today we’re talking about ethical investments that do good for your wallet and the world—so listen up if you want to invest your dollars into the good stuff.

Investing In ETFs

ETFs are Exchange Traded Funds, and put simply, they’re like a bundle of shares from multiple companies. Investing in ETFs is popular among long term investors who want to build a diversified portfolio over time. Diversification is important, because having all your eggs in one basket can leave you vulnerable to sharper market fluctuations, whereas diverse portfolios spread risk and invest in different types of businesses at the same time.

What Is Ethical Investing?

Ethical investing is all about making investment choices based around more than just the financials. Sure, an investment might have a chance at providing you tasty capital growth, but it could also go against your personal values and derive their profits from unethical practices. In order to make more ethical investment choices, investors are applying a framework called ESG to their strategies. ESG stands for Ethical, Social and Corporate Governance, and it comes down to making investment decisions based on a company or fund’s approach to climate change, human capital, social responsibility, pollution, animal cruelty, and other ethical factors.

How Do You Know If An Investment Is Ethical?

Great question—and we have a great answer (if we do say so ourselves). Much like Instagram applies a blue tick to the true authenticated accounts owned by celebrities, there is a similar thing for ethical investing. Convenient, eh? MCSI has established an ESG rating system that gives companies a score on how they fare from an ethical standpoint. Sustainable ETFs are made up of companies that fall within a defined set of ESG requirements, ensuring your funds are held with companies doing good stuff.

How Do I Invest In Ethical Funds?

Investing apps like Raiz and Stockspot make it super easy for beginner investors to start thinking about ethical investing. Raiz’ Emerald portfolio and Stockspot’s five sustainable portfolios can help you make ESG investing part of your automated investment strategy.  

The only issue with these funds is they also include investments in gold and government bonds. These can muddy the waters in terms of your investment’s sustainability, because of the complexities of where that money is going.

We spoke to our friends at Pearler to find out how we could DIY our own diversified and ethical investment portfolio like a pro, while skipping out on all the bad stuff. Here are the four that there are most popular based on their users’ real investments:

If you’re into...sustainable leaders across the world

The VanEck Vectors MSCI International Sustainable Equity ETF (ESGI) gives you the opportunity to invest in sustainability leaders with high ESG ratings across 10 different sectors from 20 countries. Excluded from the fund are companies that own any fossil fuel reserves or derive revenue from mining thermal coal or from oil and gas related activities, as well as companies with business activities that are not socially responsible investments.

If you’re into...sustainable leaders within Australia

VanEck Vectors MSCI Australian Sustainable Equity ETF (GRNV) offers a similar type of approach, but with local companies in Australia. Top holdings include Sydney Airport, ANZ and Transurban.

If you’re into...Aussie & NZ small companies doing good

The eInvest Future Impact Small Caps Fund (IMPQ) focuses on Australia and New Zealand-based small companies doing good stuff. We love to see it. The fund excludes poor ESG performers and is made up of up to 70 quality small cap stocks.

If you’re into...robotics and 3D printing

The ETFS ROBO Global Robotics and Automation ETF (ROBO) is a fund that tracks the ROBO Global Robotics and Automation Index. It’s all very Back To The Future. With this fund you’re investing in up to 200 global companies related to robotics, automation, and artificial intelligence, carefully selected against ROBO’s own ESG criteria. If you’re looking for a future-focused ETF, ROBO may interest you.

Keen to get your money invested in good sh*t? Us too. Read up on how to set up and automate an investment strategy for long term financial freedom.

Disclaimer: The information contained in this article is general in nature and does not take into account your personal objectives, financial situation or needs.

Pearler is a challenger investment platform that’s helping Aussies reach financial freedom faster and easier. Focused on long term investing to create sustainable, real life wealth on any income, Pearler is changing the game of investing by starting the conversation among real people. Right now, Pearler is granting access to Aussies who are already feeling on top of their money. You’ll have a chance to see brand new functions and invite friends and family who could use some inspiration on getting their money sorted. Skip the waitlist by using this link.

Image Credit: Wes Hicks

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