People who appreciate humanity and care about the planet often shy away from investing in stocks and shares because they are still determining whether their ethical values will be upheld.
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Ethical investing means considering environmental, social, and governance (ESG) issues when making investment decisions. The aim is to generate financial returns and positive social or environmental impact.
Ethical investment funds are becoming increasingly popular as more and more people are looking to invest in a way that aligns with their values. But with so many different ethical investment funds on the market, it can be challenging to know which is right for you.
Here are six ways how to determine the right ethical investment funds to invest in;
1. Consider Your Ethical Values
Before investing in an ethical fund, consider what your ethical values are. Do you care about environmental issues? Are you passionate about social justice? Once you know what ethical values are important to you, finding a fund that aligns with them will be easier.
2. Research The Fund’s Ethical Criteria
Each ethical fund has different ethical criteria that they use to choose investments. Some funds may exclude companies involved in certain activities, such as the production of cigarettes or alcohol.
Others may only invest in companies that meet environmental, social, or governance standards. For example, some ethical funds may only invest in companies with good gender diversity or employee relations records.
3. Consider The Fund’s Charges
All investment funds charge fees, which can eat into your returns. When considering ethical investment funds, check the fees charged by the fund manager and any other charges, such as dealing costs. This will help you to understand the true cost of investing in the fund and how this may impact your returns.
4. Check The Fund’s Performance
Like any investment, you are looking to make a return on your ethical investment. If you are considering an ethical fund, check its historical performance to see how it has performed compared to other ethical and mainstream investment funds. This gives you a clear picture of how the fund has performed over time and will help you make an informed decision about whether it is the right ethical investment for you.
5. Consider The Fund’s Investment Strategy
Understanding how the ethical fund you’re considering invests its money is important. Some ethical funds follow a ‘negative screening’ approach, which means they avoid investments in companies involved in activities that conflict with the ethical values of the fund, e.g., gambling or the production of armaments.
Other ethical funds take a ‘positive screening’ approach, which means they actively seek companies making a positive impact. Examples are companies engaged in renewable energy or those with a good record on social and environmental issues.
6. Read The Fund’s Annual Report
The annual report is a great source of information about a fund. It will give details of the fund’s ethical criteria, investment strategy, and performance over the last year. It will also provide information about the fund manager and their experience. Reading the annual report will give you a good understanding of the ethical fund and whether it is right for you.
Investing in ethical funds is a great way to align your investments with ethical values. By following the above steps, determining the right ethical investment funds to invest in will be an easy process.