Q: I want my investments to support my ethics. Is that Doable?
The short answer is yes! Just as you make a conscious effort in your daily life to support your personal values, whether they are eco- or social-based principles, you can apply this behaviour to your investment portfolio.
It starts with investing in companies that support communities and the environment. The good news is, there’s a growing industry within the investment world that is dedicated to this very type of investing.
Known for a while as responsible investing (RI) or socially responsible investing (SRI), it used to focus on excluding certain kinds of companies from your investment portfolio, such as not investing in tobacco companies. However, it has now broadened its scope to focus on investing in companies that consider environmental, social and governance (ESG) factors in their businesses.
Environmental factors can include things like a company with a plan in place to reduce its carbon footprint. Social factors may consider a company’s policy toward workplace diversity or working conditions for its employees. Lastly, corporate governance factors may look at things like disclosures on executive pay and incentives.
And while it may have started out as simply a way to invest ethically or responsibly, ESG principles are seen more and more as a way to help create long-term growth. Companies that invest in their communities, employees and environment are believed by some to be laying the groundwork for their own future success.
Getting started with responsible investments
But before you go and tell your investment adviser that you want to invest responsibly, take a minute to think about what responsible investing means to you. As you can see, there really is no one-size-fits-all approach; it can focus on everything from sustainability to ethics to impact on community investing.
There are many mutual funds and exchange-traded funds (ETFs) out there labelled “ESG,” “sustainable” or “socially responsible,” but that doesn’t mean that they necessarily factor in things that are most important to you. Take some time to research them to make sure that they align with your values. You, too, have a responsibility to invest responsibly.
Jordan Campbell is a financial adviser associate at Manulife Securities