Many Shades of Green

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Ethical investments are becoming increasingly prevalent as consumers become more and more aware of their own social consciences. This trend is putting businesses under increased scrutiny, resulting in the rising level of importance for organisations to act in a socially responsible manner.

It’s an undeniable fact that sustainability has moved from the fringes of the business world to become an ever more important item on the agenda for shareholders, employees, regulators and customers.

In this environment, any miscalculation of issues relating to sustainability can have serious repercussions on how the world judges a company and values its shares.

The issue is becoming an increasingly topical point for discussion. For instance, in this week’s Your Money supplement in the Herald Sun, reporter Nick Gardner explores the growing interest in ethical investing and the different types of ‘green’ investors that exist in the marketplace. Not all ‘green’ investors buy into ethical funds for the same reasons, it would appear.

The article quotes Responsible Investment Association Australasia executive director Louise O’Halloran who has segmented the market into three different groupings or strands – ethical investors, sustainable investors and profit-focused investors.

Ethical investors are interested in investments that reflect their own moral standards and values, sustainable investors want a tangible outcome from their investment and actively seek out companies that are doing what they believe is the right thing and finally, profit-focused investors do not take ethics into account focusing solely on profitable funds.

Gardener says that ‘the difference between avoiding ‘evil” companies and seeking ‘good” ones may sound like pure semantics but does have practical consequences. For example, a sustainable fund might invest in nuclear power, while an ethical fund probably wouldn’t.’ This highlights to the importance of researching the funds you are putting your money into and deciding what you want to achieve from your ethical investment.

Melbourne based company Ethical Investment Services (EIS) also attaches great importance to building an understanding of what is underlying the fund, in order to make an educated decision on whether there is synergy between an investor’s preferences and what the fund says it is trying to achieve. It is of the utmost importance that interested parties compare the ethical investment policy and screening criteria between different funds before deciding on a preferred option.

EIS also points out that managed funds aren’t the only way to invest responsibly, however, and many financial advisers can construct a portfolio of directly held stocks fitting your ethical requirements. This option is more flexible and gives the investor more control, choice and transparency whilst also allowing the investor to support industries or sectors in line with their own personal ethical profile.

To read the full Herald Sun article, click on the following link –