If you are concerned about investing your dollars supporting industries, you do not agree with, ethical investing may be just what you’ve been looking for.
What is ethical investing?
Ethical investing has many variations, and the specific definition is likely to vary from person to person. Broadly, themes include sustainable investing, socially responsible investing, green investing, impact investing and ESG (environmental, social and governance) investing. Most of these trends toward the same idea: creating positive change by thoughtfully and intentionally investing your money.
Traditionally investing is based around the notion of identifying companies that have solid financial return. Solid financial returns are a good thing, but these returns may well be achieved through exposure (intended or not) to fossil fuels, weapons, animal cruelty, tobacco, and gambling; industries some may not feel comfortable supporting.
Over the last decade, there has been a trend towards a more socially focused investment approach. More investors are looking to invest ethically by identifying companies that exhibit both good financial performance and align with sustainable goals.
However, what is ‘ethical’ depends on the individual. What is ethical to you, may not be to someone else. That is why it’s important to look behind the curtain of ethical investments and make sure they align with the impact you’d like to have.
ESG (environmental, social and governance)
For example, if an investor is going to invest in an oil company, an ESG approach will help determine if the oil company has a superior environmental performance and treats its employees well.
Back in the 90’s, Nike had consumers protesting outside Nike stores, and news stories were casting Nike as villain in child labor and sweatshop allegations. In 2005, Nike was the first company within its industry to demonstrate transparency, when it comes to its contract factories and publishing their first CSR (corporate social responsibility) report. The CSR report detailed pay scales and working conditions in its factories and admitting continued problems. Nike has come a long way from 90’s, by acknowledging its issues, demonstrated transparency and working toward change. And today the company is counted among CSR leaders.
Ethical investing approaches
Oracle’s Ethical Diversified Portfolio uses a negative screening third party tool to help identify companies and industries that many consider unethical and we exclude these from our portfolio. Some of the industries screened as unethical are adult entertainment, firearms, oil and gas, gambling, cannabis, pesticides, and thermal coal.
Oracle’s Ethical Diversified Portfolio uses a positive screening third party tool to help identify companies and industries as ethical and sustainable and Oracle seek to promote them within the investment portfolio. The industries we have identified as ethical are affordable housing, education, energy efficiency, financial inclusion, green buildings, green transport, health, pollution prevention and reduction, renewable energy, resource efficiency, sustainable agriculture, and food.
Impact investing and community impact
Socially Responsible Investing (SRI)
How do ethical investments perform?
Generally, companies that treat their employees well and are thoughtful about their environmental impact may also be better run and less prone to scandal. Which can result in a material benefit. For example, companies that adhere to ESG concerns may avoid fines and lawsuits for issues such as mismanagement of toxic waste disposal, sexual assault and harassment charges and fraudulent transactions, since they may have policies to help avoid those issues in the first place.
Is ethical investing right for you?
Does an oil company still count as “ethical” to you if it has robust environmental initiatives, or would you rule investments in oil out entirely?
Knowing what industries, you want to support and which you want to avoid will make it easier to include or exclude certain investments.
Want to learn more about Oracle Ethical Diversified Portfolio?
Why not visit our ethical portfolio page to learn more.
For further information on our Ethical portfolio, why not have a discussion today with a Oracle professional financial advisor. We can help you find ethical investments that suit your individual values and morals.