Ethical Investment: How to Create Social Impacts and Financial Gains?

Ethical investment, the way to create positive social impacts and sustainable financial gains.
Photo by: Noah Buscher on Unsplash.

Undoubtedly, the horrific bushfire catastrophe at the beginning of 2020 prompted the urgency of sustainable development. According to the Governance Institute of Australia, Australia’s Ethics Index Score increased from 37 in 2019, to 52 in 2020. In other words, Australians are increasingly ethically aware of the goods and services they use. 

Additionally, a study conducted by CouriersPlease (CP) revealed that about 87% of consumers are more likely to use ethically produced goods. Another 40% of consumers are more willing to use ethical products although they are more expensive than the majority non-ethical products. 

In fact, spending ethically does not have to be expensive. Through ethical investment, you can create social impact and generate financial gains simultaneously. 

In this article, we will walk through a few things: 

  • What is ethical investment? 
  • Investing in ethical exchange-traded funds (ETFs) 
  • Switching to ethical superannuation funds 
  • Engaging in ethical banking 

What is ethical investment?

The term ‘ethical’ can be defined differently by different individuals, depending on their personal beliefs and values. In general, ethical investment is a behaviour where investors invest in companies that align with their personal ethical beliefs. Most of these companies, in turn, work towards creating social impacts while generating financial gains. In Australia, ethical companies do not involve in: 

  • Trade with tobacco 
  • Fossil fuels, coal mining and mining of precious minerals 
  • Weapons 
  • Human exploitation that includes human rights abuses 
  • Gambling 
  • Pornography and related industry 
  • Animal cruelty  

Ethical investment through ethical ETFs:  

An ethical exchange-traded fund (ETF) is a managed fund that tracks stock indexes or a particular commodity based on the environmental, social and corporate (ESG) frameworks. In other words, investors can invest in ethical ETFs on the stock market, just like investing in ordinary shares and bonds. There are no solid borders on which companies should be included or excluded in an ETF. Generally, an ethical ETF will exclude firms that are involved in the oil and mining industry. 

Some ethical ETFs specifically screen for companies that focus on certain aspects of ethicality and/or sustainability.

Some of the highest-performing ethical ETFs listed by Canstar included eInvest Future Impact Small Caps Fund (IMPQ) and Betashares Global Sustainability Leaders ETF-Currency Hedged (HETH). 

Switching to ethical superannuation funds: 

In Australia, superannuation is essential for working populations because superannuation guarantees financial resources for retirees in the future. In other words, it is a long-term investment for the working population. Superannuation providers help their members to grow their retirement savings by investing this money into companies and industries they deemed profitable. 

From a 2017 study, the Responsible Investment Association Australasia (RIAA) discovered that 80% of Australian working adults are willing to switch to ethical superannuation providers. If you think that investing in an ethical ETF is too risky, you can work on switching to an ethical superannuation provider. There are two ways that which you can consider: 

  • You can switch your current superannuation investment option to an ethical investment option with your current provider or, 
  • You can switch to a new ethical retail or industry superannuation provider 

From the RIAA Responsible Returns database, some ethical superannuation providers include the Australian Ethical Investment, Future Super and UniSuper. 

Engaging in ethical banking:

A Banking on Climate Chaos report released by the Rainforest Action Network (RAN) revealed that the Big 4 banks in Australia had invested a substantial amount of their funds into the fossil fuels industry through the 5-year period from 2016 to 2020. The investments from the Big 4 into the industry totalled up to $32.41 billion.  

And part of the contribution to these industries comes from your savings and home loans approved by these banks. 

With a commitment to stop supporting the fossil fuel and mining industry, your money will be invested ethically. Rest assured, your money is invested into preserving and conserving the planet when you engage in services provided by ethical banks. 

Read for more information on green banking products available in Australia.

So what?

At Benevolence Financial Group, with the same commitment to creating a long-lasting positive social impact, we partner with ethical banks to provide you with ethical investment options and home loans. We also partner with organisations that align with the United Nations 17 Sustainable Development Goals (SDGs).

If you are still thinking of where you should invest your money, or contemplating a suitable home loan to get your dream property, feel free to reach out to us for a free consultation with one of our experienced mortgage brokers, at zero-cost. 

The information provided is general in nature and does not constitute financial advice. Please speak to us for recommendations on your individual circumstance and requirements.