How Can I Invest to Align with My Morals?

Investing in line with your values allows you to feel confident that your money is supporting positive initiatives and avoiding activities that you find objectionable or harmful to people and the planet. Aligning your investments with your morals is an empowering way to influence change while working towards your financial goals.

Understanding Value-Based Investing

Value-based investing is often categorised into different types, such as sustainable investing or gender-focused investing. A key term in this field is ESG, which stands for Environmental, Social, and Corporate Governance. ESG encompasses a wide range of criteria that moral-conscious investors can use to evaluate potential investments.

What is ESG Investing?

ESG investing integrates environmental, social, and governance factors into the investment process. This means looking at how companies perform in terms of sustainability, social responsibility, and ethical governance. For instance:

• Environmental factors include how a company manages natural resources, pollution, and waste.
• Social factors involve how a company manages relationships with employees, suppliers, customers, and the communities where it operates.
• Governance factors cover a company’s leadership, executive pay, audits, internal controls, and shareholder rights.

The Rise of Sustainable Investing

Sustainable investing, which often incorporates ESG factors, has seen significant growth over the past few decades. Since 1995, total assets held in sustainable investments have increased 25-fold. This surge reflects a growing awareness and concern about the impact of investment choices on the world. Many investors, particularly women, are drawn to sustainable investing as they seek to make more conscious decisions about how their money is used.

How ESG Funds Work

ESG funds typically operate by excluding certain types of investments while actively selecting companies that meet specific criteria aimed at improving the world. Here’s how they work:

• Exclusions: ESG funds may exclude companies or industries that don’t align with certain ethical standards, such as tobacco, fossil fuels, or arms manufacturing.
• Positive Selection: These funds look for companies that excel in areas like renewable energy, social equality, and good governance practices.

Engagement and Advocacy

Many asset managers running ESG funds use their influence to promote better corporate behavior. This strategy, known as engagement, involves pressuring senior management to adopt more ethical business practices. They may also use their voting rights at a company’s annual meetings to push for improved environmental and social policies. For example, they might advocate for reduced carbon emissions, better labor practices, or greater transparency in governance.

Benefits of ESG Investing

1. Ethical Alignment: Investing in ESG funds allows you to support companies that are making a positive impact on the world, aligning your investments with your personal values.
2. Potential for Competitive Returns: Many ESG funds have demonstrated that it is possible to achieve competitive financial returns while investing responsibly.
3. Risk Management: Companies that adhere to strong ESG standards are often better managed and more resilient, potentially leading to lower risk in the long term.

Getting Started with ESG Investing

1. Define Your Values: Determine what issues are most important to you. This could be environmental sustainability, social justice, corporate governance, or a combination of these.
2. Research Funds: Look for funds that match your values. Many financial platforms provide information on the ESG criteria of different funds.
3. Monitor and Adjust: Regularly review your investments to ensure they continue to align with your values and meet your financial goals.

Conclusion

Investing to align with your morals is not only possible but increasingly accessible and popular. By understanding and utilizing ESG criteria, you can ensure that your investments support positive changes in the world. This approach not only helps you achieve your financial goals but also contributes to creating a more sustainable and equitable future. Whether you’re just starting out or looking to adjust your current portfolio, ESG investing offers a way to make a meaningful impact while growing your wealth.