Many people, especially those thinking about retirement know that investing your funds sensibly is essential to maintaining your expected standard of living. However, more and more people are worrying about the damage that may be caused to the environment by, for example, environmental damage, climate change, inhumane treatment of all animals and exploitation of workers in less-developed countries. This balancing act between getting a good return on your investment and corporate ethical conduct is called “ethics of investing”. Other terms are  “value investing” and “socially responsible investing”.

Ethics of Investing

Also called ethics of investing aims to provide both growth on investments and encouragement to companies that promote social good in various areas, including environmental stewardship, human rights, health-related issues and reduction in poverty. It is possible to invest individually in companies that share your social concerns , but most investors choose to use mutual funds or exchange-traded funds incorporating ethics of investing.

Ethics of investing is also evident in eco-investing (green investing) that focuses on issues related to the environment. Technologies of interest to green investors cover a wide gamut of industries, including:

  • Renewable energy sources such as wind, solar, hydroelectric and geothermal
  • Energy-storage technology such as batteries for hybrid or electric cars
  • Biofuels made from non-petroleum sources
  • Green and energy-efficient building materials
  • Recycling
  • Organic farming, including green pesticides and fertilizers, and green consumer products such as cosmetics, foods, healthcare products and pharmaceuticals.

Ethics of investing also aims for positive outcomes. For example, investors may invest in companies which promise to achieve a measurable positive social impact – so-called impact investing. Yet another ethical investment strategy is faith-based investing where people with religious views will obviously not invest in companies that contravene an element of faith (gambling and contraception, say) and invest in companies which support tenets of faith.

Ethics of investing highlights that in addition to protecting your future income, you can take steps to protect and create the kind of world you wish to live in. Joakim Sandberg has produced a detailed study of ethics of investing. You can read it here.


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