Virtually everyone would agree that the world needs more responsible investments. Yet, in practice, it remains a niche segment with little market share.
The reasons for this are manifold, but most boil down to a lack of education and awareness combined with a scarcity of quality products. As such, there is still much work to be done before responsible investing achieves critical mass – both in terms of scale and legitimacy.
That said, ethics is not just a way to make your portfolio reflect your values. It can also help you achieve better returns over time while also reducing risk exposure by aligning it with your principles.
With this in mind, let’s take a closer look at why ethical investors back humankind with their money.
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Ethical Investing Can Help You Earn More and Reduce Risk
There is a strong correlation between a company’s performance and its adherence to certain principles – like the betterment of humankind and the environment. Hence, companies that are fully committed to these principles tend to outperform those that are not.
However, being ethically sound is not only about doing the right thing. It is also about mitigating risk. This is particularly true for investors. After all, if a company does not respect humankind and modern society, it will likely incur higher costs. This, in turn, will impact its bottom line, which will, in turn, impact your portfolio.
It Will Make Your Portfolio More Resilient in the Long Run
Ethical investing helps you make a positive social impact on humankind and can make your portfolio more resilient in the long run. This is because you will have minimized your exposure to certain industries, like fossil fuels, that are highly volatile and come with significant risks attached. And, over the long run, this can end up amounting to significant savings. After all, a portfolio that is more resilient will experience less fluctuation.
Keep in mind that investing ethically is not just about avoiding risk. It is also about actively seeking out opportunities to make a positive social impact on humankind. Hence, ethically invested portfolios are more likely to include companies pioneering new, innovative solutions to the world’s biggest challenges.
As such, ethically invested portfolios are more likely to outperform over time.
Ethical Investing Is the Future
There are many trends that suggest that ethical investing is the future. The first is the ageing population. As the baby boomers enter retirement, they are increasingly focused on their legacy. As such, more and more investors are looking to make their portfolios reflect their values in order to leave a positive impact on the world after they are gone.
Additionally, millennials are more interested in investing ethically than previous generations. This is likely because they grew up during an era of ecological crisis and the Great Recession, which made them more aware of the importance of responsible investing.
Not only does this suggest that ethical investing is becoming increasingly accessible, but it also points to the fact that the investment industry itself is transforming.
With that said, any investor worth their coin will know placing their money on humankind is the way to go.
Conclusion: Be Part of the Change You Want to See
Ethical investing is not only about doing the right thing. It is also about setting an example for others to follow. After all, investors are powerful agents of change. We have the unique opportunity to vote with our money and inspire others to make positive changes with theirs.
Thus, one of the most important things that investors can do is to show company leaders that there is a demand for products and services that are sustainable, responsible, and ethically sound for the betterment of humankind.