If you’ve been reluctant to invest, then it’s likely that outside of a general worry about not knowing what you’re doing and losing all your money, the number one reason you’re avoiding it is because of misgivings about the ethics of it all.
And with good reason.
The world of finance and investing has hardly had a stellar reputation has it?
In an industry beset by scandal after scandal, compounded by less than glossy Hollywood depictions which disproportionately focus on marauding testosterone (and often coke) fuelled egomaniacs parading around barking orders, if you were already on the fence this image is unlikely to convert you.
And yet as women we’d be unwise to ignore it.
We all know why so I won’t bore you with the stats. But the data that shows our over dependence on cash savings as our ‘safe haven’ for avoiding investment volatility is an own goal.
There’s a reason it’s referred to as reckless caution. We may think we’re making a smart choice. After all why wouldn’t cash be safe? It’s liquid, simple to understand and easy to withdraw when we need it. What’s not to love?
Well the eroding effects of inflation for one thing, like a mouse nibbling away at a bit of cheese year after year until our purchasing power is dwindled to nothing.
So we must make peace with investing. But what if we want to lead with values in doing so??
Well that’s where ethical investing comes in.
But part of the problem for beginners or even more seasoned investors, comes in the language. Terms often used interchangeably, despite nuances between them, include ethical investing, socially responsible investing (SRI), green investing and ESG (Environmental, Social, Governance) investing.
In simple terms however, this is a branch of investing which involves avoiding or screening out anything that threatens to do harm or is at odds with investor ethics moral or values. Obvious examples include fossil fuels, arms, supply chain exploitation or more recently companies with poor records of diversity e.g women on boards.
Investing with sustainability in mind is big business in the current climate as better informed investors recognise that good business practice does not have to mean poor returns. In recent years, a popular benchmark used to asses the performance of stocks in this category, the FTSE4Good index, beat the FTSE 100 over 1,3 and 5 years. (Source: The Times).
Beware Corporate Greenwashing
But just because something claims to be doing good, doesn’t mean you can relax on the due diligence front. In fact, with so many different providers clamouring for your attention, you might need to step up your scrutiny levels instead.
With growing demand for investing with a conscience, there have been reports of companies labelling funds as ethical or green where the underlying investment does not live up to that description, in a phenomenon know as corporate greenwashing.
It doesn’t mean this is a category you should avoid however, but as with all things investment related, do your research, read the small print and remember you are in control.
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