Your investments may fund activities that are not sustainable and may be contrary to your ethics. Money talks, what is yours saying?
Investing ethically considers your investment's impact on society and the environment as well as its profitability. A recent study by AMP (June 2006) found that the median ethical investment manager has outperformed the S&P/ASX 200 Index over one, two, three and five years to 31 March 2006 (Ethical Investment Association Australasia). So, you can now make money while making the world a better place!
How to do it now!
Consider what labour standards; social, ethical or environmental, you want to invest in. Are you comfortable owning investments in uranium mining, profiting from people working in unsafe conditions, supporting products that destroy the Amazon rainforest? Knowing the answers to these questions will enable you to filter and target your investments and superannuation funds to ensure you are investing in alignment with your ethics.
Ethical Screening & Sustainability themes. There are several ways to hone in on companies and investments that are more ethical: Negative Screening, Positive screening, and Sustainability Themed Investments.
Negative Screeningsystematically excludes industry sectors, companies, practices and even countries that are seen to be engaged in unethical behaviour. Common criteria include:
Companies implicated in human rights abuses,
Companies that make harmful products,
Positive screening is investment in sectors, companies or projects selected for positive Environment, Social, Governance criteria (ESG) or sustainability performance relative to industry peers. Common criteria or areas include:
Sustainability Themed Investing focuses on investment in themes or assets specifically related to sustainability factors. This commonly refers to funds that invest in
Ethics. Ethics are a statement of what we stand for and a display of how important this is to us. Ethical decisions in the investment space can often be evaluated by common sense. Some back-of-the-envelope guides may include…
Does my action (investment) support or detract from my stated position or ethics?
Does my action (investment) add to or detract from the quality of the world my children will inherit?
Would I support what this company is doing if there were not dollars to be made by investing in it?