When it comes to investing, there’s a lot to consider. Do you opt for stocks and shares, or are alternative investments like bonds and commodities a better bet? The recent market volatility has made it even more important for investors to think carefully about their portfolio and how it is positioned to cope with challenging conditions in the future. But what if your values also influenced how you invested your cash? How would that impact your returns? These are all critical questions, especially as we see an increasing number of people take responsibility for the impact their money has on the world. An ethical portfolio takes into account the social, environmental, and governance factors that may have an effect on financial performance when selecting companies to invest in.
The importance of sustainable investing
Investing with an ethical and sustainable approach can help investors manage risk, protect the environment, and promote responsible business practices. It’s estimated that $30 trillion worth of assets is currently invested ethically globally. Investors can focus on how to build an ethical sustainable portfolio to ensure they are looking beyond the financial aspect of their investment decision.
– Protecting the environment
– Companies that positively impact the environment can benefit investors by reducing the potential for future financial risk.
– Promoting responsible business practices
How to build an ethical portfolio
– Identify your values: Take some time to think about your key values and what matters most to you when making investment decisions. Make a list of these values, and then consider how you can incorporate these into your investment portfolio.
– Research how to build an ethical, sustainable portfolio: With your ethical values in mind, research the market to get a better idea of the companies that align with these values.
– Review your current portfolio: If you already have an investment portfolio, look at the companies that make up your investments to see how they align with your values.
Socially responsible investment funds
If you’re keen to adopt an ethical investment approach but don’t have the time to do all the research yourself, there are plenty of socially responsible investment funds (or SRI funds) that can help you build an ethical portfolio. These funds are professionally managed, and as a result, they charge a management fee built into the fund’s investment strategy. This fee can make up as much as 1% of the fund’s value each year. When selecting a fund, it’s essential to understand its strategy and ensure it’s aligned with your investment objectives.
Many of the largest funds in the SRI space focus on investing in stocks of companies that are seen as environmentally friendly, for example. While this is a great approach, it doesn’t suit everyone, so it’s worth being aware of the option of investing in commodity-based funds. Commodity-based funds are designed to provide investors with exposure to the commodities markets, including precious metals and other materials used to produce a range of products and materials. Commodity-based funds can be a great way of getting exposure to some of the more volatile markets while supporting sustainable supply chains.
Investing in how to build an ethical, sustainable portfolio is not a new concept, but it has seen a surge in popularity in recent years. Investors are now looking far beyond the financial side of their decision and are more aware of the impact their investment decisions have on the world. There are plenty of ways to build an ethical and sustainable portfolio, but it’s important to remember that it takes time. Sustainable investing is about long-term decision-making, so don’t expect to see results overnight.