Developing a profitable investment strategy can be challenging even on the best days, and factoring out the idea in terms of ethical investment can be even more challenging to implement. Because you have to think about ethical investments in terms of your moral codes while figuring out the profitability of the investment.
The definition of an ethical investment may vary from person to person, and so does the strategy or approach used in its implementation. Therefore, you are required to develop a personalized investment strategy that aligns with your values but is also a profitable one. This article guides you on how to think about ethical investments that are profitable without necessarily having to compromise your beliefs.
Aspects to Consider When Investing Ethically
When choosing an ethical investment, the different aspects heavily depend on what matters to you. While most ethical investments strive to impact the world, how they achieve this varies. Below are some factors you should consider when choosing an ethical investment.
The Sustainability of the Investment
If you are stuck on how to think about ethical investments, think in terms of sustainability; that is, find an organization or company whose means of production does not lead to the depletion of resources they use. In this case, avoiding those investments that rely on natural resources is advisable.
Instead, invest in those companies that focus on renewable energy and embrace recycling or reusing practices. Sustainability could also mean investing in companies with a guaranteed financial return, companies that are profitable even in the long run, and companies whose actions will not come back and haunt them later.
The Social Responsibility
Examining the social responsibility of the company is yet another way to determine whether it is ethical or not. If you are wondering how to think about ethical investments, look at how the company treats its employees and its customers.
Ask yourself specific questions like, are employees’ rights upheld? How about the working conditions? Are they safe? Do employees earn a livable wage? If the evaluation is true, the company is socially responsible and qualifies to be included in your ethical investment portfolio.
Consider Green Investing
Green investing is one of the ways you can think about ethical investments. It is similar to sustainable investments because companies in this category pay closer attention to the environmental concerns of their products and operations. Examples of green investments include companies focusing on clean energy generation and manufacturing energy-efficient and low-carbon emissions products.
Corporate Governance of the Organization
When the issue is how to think about ethical investments, many investors will pay attention to the organization’s management and whether the corporate governance aligns with their morals. You may consider the diversity of the company’s board of directors and whether the company is responsive to the demands of the shareholders. All these considerations are included in the ESG investment strategy and make it one of the most efficient approaches to ethical investment.
Ethical investment is a strategy that utilizes one’s moral codes to filter investment options. If you want to know if an investment is ethical, consider the sustainability of the investment, social responsibility, and green investing. Also, pay close attention to the organization’s corporate governance.