Investing is no longer a purely financial decision where the best outcomes are based on profits.
In recent years more philanthropists have been basing decisions not just on the money they make, but the benefit their investments will have to communities and the bigger social good.
With ethical investment you’re not just making a financial investment, you’re making an investment for the future. And this kind of ethical, social investment is on the rise.
By 2019 ethical investments were worth £5.1 billion – an increase from £830 million in 2011, according to Big Society Capital, It’s clear that ethical and social investment is here to stay. But with so many options, where to invest your money can be daunting.
Brevio, a platform that matches grant givers and non-profits, has put together a guide to ethical investment.
So what exactly is ethical investment?
Ethical investments are investments that have goals beyond financial return. They aim to have a positive impact on society, through incorporating environmental, social and governance (ESG) factors into investment decisions. Put simply, it means investing your money into socially conscious, ethical and responsible organisations who have a clear mission to improve society. Whether that’s investing in ‘green’ companies or those with a higher social purpose.
For more check out the UK Sustainable Investment and Finance Association’s explainer on sustainable finance.
How does it work?
An ethical investment works just like any other investment. But as well as (or instead of) monitoring financial returns, you monitor the investment’s impact on a specific cause. From using investment funds or wealth managers, to apps like Nutmeg, to managing your own investments, there are many ways to invest your money. For example, you might invest in an organisation that’s committed to reforesting tropical areas with native species as part of a broader strategy to combat climate change and create the conditions for biodiversity gain. You could monitor the impact of your investment by looking at how many trees were planted, what species were included, and what total area was impacted – all as a direct result of your funding.
What’s the best way to do it?
Before you start your ethical investment journey, it’s important to consider the following:
· What are your values?
· What do you want to get out of it?
· What impact do you want your investment to have?
· Where is your money already invested?
· Do you have a timeframe for the investment?
Answering these questions will help you to create an investment plan and set your goals. Once you’ve clearly defined your investment plan you should consider whether you want to work with a wealth manager or investment fund, or manage your own investments.
There are pros and cons to both options. While using a wealth manager or established fund will give you the benefit of experience, managing your own investments will ultimately give you more control. And there are plenty of apps and tools to help you get started.
The Times money mentor also has some great tips on investing ethically. Just keep in mind that going it alone comes with considerable time to research your investments and ensuring you understand the company’s values, as well as your potential returns.
How do you find the right charity?
Picking the right charity or organisation to invest in can be challenging. But working through the questions outlined above will help you find the charities most aligned to your values. You can discover causes that need support at the moment here.
Just keep one thing in mind. Your investment still needs to return you some financial benefits. You might have a cause you care about particularly, but choosing the right charity or ethical investment shouldn’t just come down to your personal preference. Look for something that you believe will contribute to a greater good and have the biggest societal impact. It’s important to do your own research.
Brevio’s Insights & grant builder takes you on a user-guided journey that delivers real insights while you build your criteria. It can help you to identify causes, groups and locations that are in need of urgent funding to help you target your investment towards the right causes that will do the most good. It could also help you discover new areas of investment you might not have through about before – especially if you’re new to ethical investing.
There’s many ways to invest ethically. We hope these tips will help you to get started.