As an investor, you’re interested in maximising your returns. There’s no doubt about that.
But the question is: Are your investments reflecting your values?
If you’re answer’s “No” or unsure, do you want them to?
In this article, I’ll share how ethical investments can help you align your values with your investment portfolio and the steps to get started.
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Why Venture into Ethical Investments?
On the surface, ethical investments are no different from traditional investment opportunities in your portfolio.
The key difference is that ethical investments allow you to align your values and beliefs with your investment choices.
Each time you invest in a business that embodies the values and principles you hold dear, you send these establishments a message that you approve and support their principles and practices.
Some ethical investment options, like equity investing, can even allow you to own a stake in a startup poised to make a positive change in today’s society.
Not only are you diversifying your investment portfolio to make it more resilient during a recession. You’re making a difference to make this world better for everyone.
Steps to Align Your Investments with Your Values
1. Identifying Your Personal Values
We all have unique values and principles stemming from our cultural background, family upbringing, and life experiences.
Take some time to reflect and identify what you’ll consider to be your “non-negotiable” values. These are those that you’re not willing to let go or compromise, regardless of the circumstance or consequences.
Reviewing your current investment portfolio is an excellent starting point.
Whether you realise it or not, most—if not, all—the funds and businesses you invested in share some things in common.
For example, more than half of the funds you invested in are towards providing women and people from minority groups access to develop and improve their technical skill sets.
Or you may have noticed that all the businesses you invested in have policies and initiatives to reduce their carbon footprint.
Take note of these similarities and use this as one of the benchmarks when deciding on the next opportunity you invest in.
2. Choose an Ethical Investment Strategy to Use
Ethical investors use one of these three strategies when building and diversifying their investment portfolio:
Negative Screening
Negative screening involves avoiding companies that engage in activities that don’t align with your values.
This approach allows you to avoid investing in opportunities that don’t align with your values. The downside is that it may limit your investment opportunities.
Positive Screening
Positive screening, on the other hand, involves actively seeking out companies that align with your values.
This approach allows you to actively invest in companies making a positive impact. However, it may require more research and due diligence.
Impact Investing
Impact investing aims to make a positive social or environmental impact while generating a financial return.
It can be financially and morally rewarding but also risky and require a long-term commitment.
3. Do Your Research and Due Diligence
Before investing in ethical funds or companies, make it a point to conduct a background check and due diligence. This is especially crucial if you plan to invest in early-stage startups.
Like any investment, investing in early-stage startups comes with risks. So, you want to ensure that the investments you make are as lucrative as they are aligned with your values.
Some key factors ethical investors consider include:
Financial Performance
It’s vital to research the financial performance of the investment to ensure that it is a sound financial decision.
Look at the investment’s historical performance, fees, and expenses to determine whether it is a good investment opportunity.
Management Practices
Research the investment management practices to ensure the company or fund is run ethically.
Look for transparency in their reporting and management practices, and investigate whether they have a track record of making ethical decisions.
Social and Environmental Impact
Finally, research the social and environmental impact of the investment. Look for investments that align with your values and beliefs, and investigate the company’s policies on human rights, labour practices, environmental protection, and climate change.
Kanopi is one early-stage startup that meets all these factors. It provides green consumers a platform where they can purchase affordable, but sustainable, products conveniently.
Another is YoungPlanet. The app launched by this startup helps parents connect with each other so they can swap children’s clothes and other items. Not only are they helping these families keep their costs down, but they’re also helping reduce the amount of children’s apparel and other items ending up in the UK’s landfills.
4. Stay Up-to-Date with Ethical Investment Trends
Ethical investment trends are constantly changing. These trends can significantly impact the performance of your investment portfolio. Keeping up with trends can help you identify emerging industries and companies that align with your values and have the potential for high returns.
Subscribe to reputable financial news channels, industry newsletters, and reports like the one we’ve recently published on the latest investment trends in the UK to keep an eye on. These provide up-to-date information on how national and worldwide events can impact your investments.
Attending conferences and webinars is another excellent way to stay informed about ethical investing trends. These events allow you to hear directly from industry experts, network with other investors, and learn the latest trends and investment opportunities.
5. Work with an Experienced Investment Consultant
Ethical investment consultants can help you identify investment opportunities that align with your values. They can also provide insights into these investments’ financial performance.
To find an investment consultant specialising in ethical investing, research online and check their qualifications and experience. Ask for recommendations from friends or family with experience working with investment consultants.
Once you have identified a few potential candidates, schedule a meeting to discuss your investment goals and ethical values.
When working with an investment consultant, it is crucial to establish a clear understanding of your expectations and their fees.
Ask about their investment approach and how they identify ethical investments. A good investment consultant will be transparent about their fees and strategies and work with you to create a customised investment plan that aligns with your values and financial goals.
Trendscout’s investment consultants have a proven track record of successfully matching and connecting investors with early-stage startups that align with the investor’s values and principles.
The result is a win-win partnership for everyone.
The startup founders can raise the capital they need to launch and scale.
At the same time, investors get equity in a startup that embodies and practises the values and principles they hold dear.
Key Takeaways
Ethical investments are a win-win option for investors, regardless of your investing experience.
They enable you to diversify your investment portfolio so that it’s strong enough to remain profitable even during a recession.
At the same time, it allows you to impact your community and the world positively.
But just like with any investment, you must do proper research and due diligence to ensure you’re putting your money into a worthwhile investment.
Only then can you truly reap the benefits that ethical investments provide.
