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Ethical Investments 101: How To Manage an Ethical Portfolio

By Asad , in Business , at July 23, 2022

Ethical investment management can seem difficult in today’s world, especially with everything going on in the news. But it’s quite simple when you break it down into basic steps. This guide on ethical investment management will give you tips and advice on managing your own portfolio so that you can invest ethically and keep your finances running smoothly.

What Is Sustainable And Socially Responsible Investing?

Sustainable and socially responsible investing (SRI) is an investment discipline that considers environmental, social, and corporate governance (ESG) criteria to generate long-term competitive financial returns that impact society in a positive way. Investors can do this by avoiding industries with poor ESG profiles, such as fossil fuels or tobacco. They can accomplish this by actively engaging with companies about ESG issues to encourage improvements. Or they can screen out stocks of specific companies based on their involvement in sectors like weapons production, gambling, or high-risk loans. SRI funds are available for retail investors through the major brokerage firms, banks, and mutual fund providers.

Principles of Ethical Investment 

Ethical investment is based on the belief that it is possible to make money while investing in companies with a positive social and environmental impact. 

There are three main principles of ethical investment: avoiding harm, promoting good, and achieving a just society. Avoiding harm means investing in companies that do not cause or contribute to social or environmental problems. Secondly, promoting good means investing in companies with a positive social or environmental impact. Lastly, achieving a just society means investing in companies that benefit all stakeholders – including employees, communities, and the environment – not just shareholders. These are the building principles and the golden rule governing ethical investment. 

How To Assess Your Investments

The first step is to assess what you currently have invested in. Look at your investment portfolio and make a list of all the companies you are invested in. Then, research each company and determine if they have any ethical controversies. If they do, it might be time to sell your shares. You can measure your impact on an unethical company by taking the amount of money you would invest with them over ten years and multiplying that by their number of employees (employees can be measured by market cap). For example, if you were considering investing $10,000 in a company with 18 thousand employees as of January 2022, you would have $186 million worth of effect on them annually. Think about that for a second! If this company had done something wrong, you’d have influenced nearly 186 million people’s lives! That makes a pretty powerful statement. You should think long and hard before putting any money into a company that doesn’t care about its workers or customers because of how much power you will have over their future. 

Another thing to consider when assessing your investments is to look at industries with high-risk factors, such as oil production or pharmaceuticals. These industries often produce products that are harmful to humans and the environment. It’s best not to invest in these types of companies because it poses risks to your health and those around you who live near these plants or factories.

Common Myths About Ethical Investing

Some common myths about ethical investing include that it is too expensive and complicated or that the companies you invest in will fail. Neither of these is true! In fact, you can easily find low-cost funds with solid returns and high-quality research reports to help make your investment decisions. You also don’t have to worry about one company going under and taking your money with them! Even if they did, many companies offer guarantees on their investments so that you get all of your money back in case something goes wrong. You just have to maintain a sober ethical investment management plan to protect your seed money.

Conclusion

It can be daunting to invest on your own ethically. Finding the perfect ethical investment for your portfolio will take a lot of time, research, and effort. But if you want to put in the work, there are plenty of options for investors interested in doing good. All you have to do is find your best fit and get the ball rolling!

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