It is interesting to note that morals and viewpoints are taking center stage in the decision-making for individuals and companies around the world. The word “ethics” wraps the trend up in one word. Ethics refers to the moral compass that directs a person’s behavior and decisions.
Ethical investing is an investment that considers more than just the quest for profit. It takes morals and personal opinions into consideration.
Let’s make this a bit clearer. Take John, for example. He believes that exploring fossil fuels causes damage to the environment. He is an advocate of green energy, and he writes articles that rail against the use of fossil fuels. John is also someone who wants to invest and grow wealth. Ordinarily, John would seek to find an investment manager. The investment manager does not necessarily have the same ethics as John, and he doesn’t believe in all the things John advocates. He wants to make a profit for his client. That sounds fair enough.
Well, John has more options now, and that is what we call an ethical portfolio. John may decide that he doesn’t want to invest in Shell, ExxonMobil, or British Petroleum. An ethical portfolio as a branch of investment protects his moral values.
What “ethics” means varies from individual to individual. It is critical to look beyond the tag and focus on the impact of your investment. Are you seeking sustainable investment? Socially responsible investment? Or green investing like John in our story. These things stand your ethics out from others.
Socially responsible investment, for example, looks at avoiding specific industries like tobacco, alcohol, gambling, etc. An investor whose ethics makes him turn his nose on these industries would not want to help them grow by investing in them.
Faith-based funds are another option in ethical investment. They invest in stocks that follow religious guidelines and ideals. Anything that deviates from this is avoided.
This is part of the concept behind the ethical investment. It is not a passive investment strategy, and it involves a lot of research to ensure it correlates with the investor’s moral or ethical values. It will most likely not give optimal returns, and the investor is always willing to forgo financial gains.
Fees for ethical investment can be higher because of the research involved in finding the right investment opportunity. Apart from the lower return on investment and higher cost attached to managing such a portfolio, there is no real disadvantage of investing based on ethics.
Advantages include the emotional satisfaction derived from knowing you are doing something that aligns with your personal beliefs. At Zimvest, we take your ethics seriously: as seriously as your profit, and that is why today is a good day to invest with us.
