ethical investing

Ethical Investing

Socially responsible, sustainable and ethical investments

It's natural to want good investment returns, but those returns can be measured in more than dollars.  What our investments do to others and the planet is important.  Those are part of the returns from your investment.

Working out which SRI investments to use in achieving your objectives can be a challenge.  Your idea of what is socially responsible or responsible can be very different from the criteria of a given SRI investment manager.  For some people, a given set of ethical investment managers may achieve the objectives.  However, for others it might be important to have more control over the specific companies that are being invested in.  We can work out what is suitable for you, put it in place and maintain it.

Do SRI investments have lower returns?

It varies from time to time, but it's not unusual for socially responsible investments to achieve equal or even higher returns than ordinary investments.  That is likely to continue as they become more popular with more and more people making that a requirement for their portfolios.  Having said that, there will be times that they underperform, so you need to decide whether a socially responsible and ethical character is really essential for you.

Ethical Investing FAQs

  • What is an Ethical Investment?

    Ethical investments involve "Socially Responsible Investing."  This has to do with the companies that are being invested in demonstrating responsibility with regard to how they deal with people and the environment.  Details vary from one investment to another, but generally a filter is applied to the investment universe being dealt with to get rid of the really 'nasty' ones, then often a system is used to allow the more socially responsible ones to bubble up closer to the top.

    SRI investments don't necessarily deliver the top financial performance, as that is a secondary objective.  However, historically their investment performance has been very good as they are becoming more in demand, and as their policies tend to promote long term benefits.

  • How can my own values be reflected in my investments?

    Each of us have a set of values that we live by.  And, as every person is unique and special, it's not a surprise that no two sets of values are going to be absolutely identical.

    This is especially true when it comes to ethical, socially responsible investing.  Take two people that highly value trees and forests.  One sees them as a place for life to thrive as a habitat for animals.  The other sees them as highly valuable as a means of storing carbon in long lasting structures, and seeks to maximise that value by harvesting and replanting.  Both of them could be seen as responsible and sustainable, but they might have quite a shouting match as the one has chained himself to the logging truck owned by the other!

    So, how do you reflect your values in your investments?

    Begin by writing down what your values really are.  Then consider how your investments may impact the propagation of those values.  Finally, decide how important it is to be precise in selecting investments and/or investment managers that reflect those values.

    As you do that, you can then work out whether it's adequate to stick with investment managers that are pretty much in harmony with your values, or whether you need to stick to investing in direct shares and bonds, such that you have precise control over the impact of your investing.

  • What investments are environmentally sustainable

    In general, ethical and socially responsible investment managers will be targeting businesses to invest in that are kind to the planet.  They will weigh up factors contributing to global warming and other prominent environmental issues and seek to invest in companies that also take those matters seriously.

    Obviously, it's not easy to pick out businesses that would respond exactly as you would to these matters.  So, it's generally a matter of selecting those companies that are closest to the prevailing opinion of what is socially responsible and sustainable.

    Ultimately, if these matters have supreme importance for you, it's likely that you should be investing in direct shares and bonds, researching details about businesses and how they operate with regard to these matters, and investing only in those ones that you really feel in harmony with.

Self-managed super funds are the realm of financial advisers, so the place to begin is with our own financial planning division at Grace Financial Services. Once we've worked out the best overall financial planning strategy, we can discuss your loan needs through our lending division, Grace Loans.

Note that while there are potential benefits to gearing within an SMSF, it does increase the level of risk. Both positive and negative returns are multiplied, so careful attention is needed in asset selection. Depending on your circumstances and investment time frame such gearing might not be appropriate for you. Getting specific, personalised advice taking these matters into consideration is vital. That advice should come from professional legal, financial, accounting and lending advisers.

Grace Financial Services Pty Ltd and James Massey are Authorised Representatives of HNW Planning Pty Ltd, , AFSL 225216. Authorised Representative nos. GFS: 452765, James: 398841. Content of site may not be fully up to date as legislation and financial products are constantly changing. Any advice provided on this website is of a general nature not taking into account your personal objectives and situation. Such matters are important to consider prior to taking any action. Please make an appointment to discuss your specific situation so that appropriate advice may be given with regard to suitable products using current information.