Green and ethical investments are becoming more and more popular every year. This type of investing is all about backing industries and businesses that are part of the shift towards a fairer and more sustainable world. Green and ethical investments not only help sustainable businesses to grow, they can also open up some exciting opportunities for profit — albeit in a way that’s better aligned to your personal values.
Different methods of green and ethical investing
Investing in the green and ethical market works slightly differently from the world of conventional funds and varies on a case-by-case basis. Here are some common methods used to decide whether an investment has the necessary credentials:
Ethical investing is all about making personal decisions about whether a company or industry aligns with your personal morals or values. If you decide to invest in a startup that grows organic fairtrade coffee instead of tobacco, you’ve made an ethical investment based on your own judgment.
Environmental, Social and Governance investing (ESG) works by evaluating how green or ethical an investment is by considering various factors:
Environmental: How will the investment directly impact climate change, deforestation, or pollution?
Social: Does the investment prop up dubious practices like child labor or ruin local economies?
Governance: Is the investment going to a company with questionable ethics, a lack of transparency, or promoting a monopoly?
This type of investing is about making an ethical or environmental impact as well as a financial gain. Impact investing can be pretty hard to quantify, especially if you’re trying to make a difference with social issues. On the other hand, carbon usage and other environmental factors are beginning to be measured in line with UN Sustainable Development Goals, making it slightly easier to make an informed decision.
How green and ethical funds work
Putting your money in a green or ethical fund works in precisely the same manner as a traditional investment. Once you’ve decided upon a strategy, you’ll simply choose funds that match your objectives and manage your portfolio in the standard manner.
The practice of actually choosing an investment based on your own principles is slightly trickier: It can be challenging to separate your head from your heart when making these kinds of decisions, so it’s crucial always to have the success of your portfolio at the forefront of your mind when making a decision.
Beyond profitability concerns, the actual choice is largely dependent on your own ideals. Are you more concerned with social or environmental issues? Have you considered the downstream impact your investment could have on local communities or habitats? Ultimately, those decisions are ones only you can make.
Can I make a profit through green and ethical investing?
While it’s important to point out that any kind of investment can go down as well as up, it’s definitely possible to make a good return by investing in green or ethical funds. Today, investing no longer has to compromise a person’s moral code or principles and can positively impact the environment and society as a whole.
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