Ethical Investors: The barrier to entry for investing in stocks and ETFs has never been lower, with services that allow for little to know initial deposit limits, almost anyone can start investing. Consequently, more and more people are realizing the power their investments have in the market and in the actions publicly traded companies take in supporting their environment.
In this guide, we will break down how ethical investors define ethics and how they determine which socially responsible stock funds to invest, and a few options available to investors.
How Investors Define Ethicality
For investors, ethicality generally refers to investing in companies and projects that align with their personal values and beliefs, particularly in regard to social and environmental responsibility. This can include environmentally sustainable practices, fair labor standards, and avoiding investments in industries that contribute to harm, such as tobacco or arms production.
While ethics can vary depending on the person, many inventors apply the principle of the golden rule to help differentiate which socially responsible stock funds to invest in. The golden rule states that we should treat others like we would want to be treated. In the world of investing, it means we should only invest in companies that create a positive impact on the world.
Benefit Corporation ETFs
These ETFs invest in socially responsible stock funds certified as benefit corporations, these are for-profit entities with a legal obligation to consider the impact of their decisions on society and the environment on top of the financial interests of the shareholder. Benefit corporations are held to higher standards of transparency and accountability than traditional corporations and must report on their social and environmental performance annually.
Benefit corporation ETFs are great socially responsible stock funds to invest in and can be an option for investors who want to align their investments with their values. Once you determine your ethical investment goals, you can research the benefit corporation ETFs that align with your investing values.
Single Theme ETFs
Single-theme ETFs are exchange-traded funds that focus on companies that operate in specific industries or fields. Ethical investors may look at single-themed ETFs composed of socially responsible stocks funds focusing on a particular issue they are passionate about. For example, an ethical investor may want to invest exclusively in companies focusing on clean energy.
So when deciding which socially responsible stock funds to invest in, investors would only consider ETFs consisting of companies focusing on renewable energy. However, it’s essential to understand that these singular issues, while important to you, may not constitute the most effective use of your money, as other issues may have more impact on sustainability. Additionally, focusing on one issue could leave you vulnerable to market turns as your investments are not diversified across different industries.
Choosing Socially Responsible Stock Funds To Invest In Can Make A Real Change
Ethical investors can promote real change by influencing companies to think sustainably and rewarding companies that act ethically. With ethical ETFs, you can invest in a large swath of companies at once to help promote change and diversify your portfolio. As you begin your journey as an ethical investor use this guide to find socially responsible stock funds to invest in.
