Step-by-step: How to start investing ethically
If you’re looking to make a difference with your money, here’s our simple step-by-step guide on how to invest ethically and sustainably.
1. Understand your values
When we think about ways to invest ethically and sustainably, we’re really looking at ways to boost your financial footing without giving up the beliefs and values that are important to you. Needless to say, before you can think about how to invest ethically, then, you’ll need to know what your values are.
2. Assess your existing investments
If you’re already an investor, which you probably are if you have a pension, you’ll need to see if it has the characteristics that reflect your values. Then identify where you could make changes to better reflect what’s important to you. Keep in mind that investing ethically, depending on your beliefs, may mean you need to change your investment management provider.
3. Consider how involved you want to be
It’s common for anyone wanting to know how to invest ethically to be hands on, because they want to know their money is going to the right places. If that’s you, you should consider building your own portfolio that’s aligned with your ethics.
This is a lot of work. Although intentions are often good, many don’t have the time and know-how to invest as ethically and sustainably as they’d like. It takes a lot of work to figure out what ethical commitments a company has made. If you can’t dedicate much time to your investments, you should consider professional financial advice.
4. Know where you can invest
Once you’ve decided how involved you want to be and what values are important to you, you can start building your portfolio, and looking into how well businesses score in terms of ESG factors. This can help you decide if you’d like to invest in them. There are also many ways to invest ethically and sustainably that offer tax allowances, such as ISAs and your pension.
5. Create an ethical investment strategy
You should start your ethical investment strategy by answering some key questions.
- How much do you want to make?
- What do you want to use the money for?
- How quickly do you need it?
- How much can you stand to lose?
- How much risk can you take?
6. Monitor your ethical investments regularly
Your investments can go up and down at any time, so it’s important to review your investments regularly to make sure they’re still working in the way you’d like. However, if your primary focus is on ethical investing, more frequent reviews might be necessary. Societal shifts, climate change concerns, new technologies and the like all mean you could take advantage of a diversified portfolio that considers several issues.
What options do I have when investing ethically?
Picking shares
Buying shares from companies you like is an option, but you should try to build a balanced portfolio. This can take time. Investment platforms have made ethical investing easier, but they charge fees when you buy or sell shares, which could eat into your returns. It’s common to seek independent financial advice.
Investment funds and trusts
Investment funds or investment trusts are where you invest in hundreds, sometimes thousands, of businesses at the same time. These can be passively or actively managed, depending on how much you want to pay. Actively managed tends to cost more because a fund manager will pick your ethical investments for you.
Bonds, gilts and cash
Green and ethical bonds can be a good option for a fixed-income investment and for anyone who’s a bit nervous in terms of risk. There are also UK Government green gilts as an ethical investment option, as proceeds go to various environmental initiatives.
Will I make money by investing ethically?
Potentially. Like all investments, however, the value of assets can change. That’s why it’s always recommended to have a diversified portfolio, so that your investments can better withstand the ups and downs of the market. If you’re the kind of person who needs guaranteed returns, a savings account might be a better option.
However, the appetite for more methods on how to invest and do business ethically and sustainably is strong. Many believe companies that demonstrate their ethical commitments do materially better, and it’s worth remembering there are many ethical companies that have decades of growth under their belts.
As you can see, there’s a lot to think about when deciding how to invest ethically and sustainably. That’s why at Oury Clark our dedicated professional advisors are ready to help. Book your free consultation so that when you’re saving for the future, you’re saving the future.