Examining How Ethical Investments Portfolios Are Built
Whether you invest in your own company’s stock, a 401(k) plan, or some other type of account, chances are good that sooner or later, you’ll need to make a decision about where to invest your money.
With so many different variables involved in investing money — and the opportunity for pitfalls — it’s important to understand how your investment portfolio affects not only your bottom line but also your personal values. After all, what feels right for one person might not be for another.
Read on to learn more about how to build ethical investment portfolios.
Consider Your Investment Goals
First and foremost, you should always keep your investment goals top of mind when looking to invest. However, this advice is especially important when considering ethical investing — a portfolio that puts social or environmental concerns at the forefront is not for everyone.
You’ll need to consider your risk tolerance, current financial situation and future plans for retirement. After all, ethical investing can be riskier than traditional options, and you’ll want to make sure you’re able to weather any storms that might arise.
Know Your Values
Before you even begin researching potential investments, you should take some time to really consider what matters most to you. What are your core values, and how can you use those to guide your investment decisions? For many people, sustainability is a core value that applies to both their lives and their investments.
If you’re a vegetarian, for example, you might want to steer clear of companies that profit off of animal products. If you care deeply about social justice issues, then you might want to invest in companies that actively work to reduce discrimination in their hiring practices. If you’re worried about climate change, you might want to make investments in renewable energy companies.
Do Some Research
If your values are guiding your investment decisions, you’ll have a leg up on the research front.
You might want to check out the Sustainability of Company Investments (SCI) or Ethical Investment rating systems to make sure the companies in which you’re interested are actually doing well for the world. Many investment firms will also offer socially responsible investment (SRI) funds that make it easy to invest according to values.
If you don’t have a specific company in mind, but want to invest in an industry that aligns with your values, you might want to consider an index fund. These funds allow you to invest in a wide variety of companies, and you don’t have to worry about picking the “right” ones.
However, you should still do some research to make sure the industries you’re investing in align with your core values.
Talk to An Investment Broker
As you research potential investments, you’ll likely come across someone in the investment industry. Whether you’re visiting your local branch bank, chatting with a financial advisor, or researching online brokers, you’ll no doubt run into folks who can help you make informed decisions.
If you’re looking to invest ethically, you might want to make sure you’re dealing with someone who is knowledgeable in this area.
Chances are, you won’t find many brokers who specialize in ethical investing. However, it never hurts to ask. If you’re already working with an investment broker and want to bring up ethical investing, you might want to start by asking questions about the company’s investment philosophy. What types of companies does the broker typically invest in? What are their core values?
While it’s impossible to predict exactly what will happen or when, we can be certain of one thing — change will occur. Investors have the power to make a difference by creating ethical investment portfolios, but only if we’re willing to do what’s necessary to create a more sustainable future.