What is Ethical Investing?
Choosing where your super savings are invested is an important decision, and can be based on many factors, including your attitudes and tolerance to risk, your investment timeframe, and your stage of life.
Socially responsible investment (SRI), or ethical investment, takes environmental, social, governance (ESG) or ethical considerations into account for the investment selection and management process, which can be important factors for some investors. Ethical investing may involve avoiding investment in companies that are involved in the production of alcohol, tobacco, armaments, gambling and nuclear power.
While there isn’t sufficient evidence to prove that ethical investing delivers better investment returns over the long term, supporters of SRI investing raise a number of points to explain how ethical investments can potentially perform just as well or even better than traditional investments, including:
- Companies that focus on minimising social and environmental risks or work to provide solutions to issues like climate change and commodity scarcity may be more competitive and well-placed in the future.
- The SRI screening process eliminates companies that engage in unsustainable business practices or contribute to environmental and social problems. This could lead to reduced profitability as they face risks of government regulation or consumer boycotts.
Do your homework
Before you decide to invest in a company or a solution, do some research to check the accuracy of their claims. There are plenty of options available that are very clear about their approach to ethical investing, and it can be very clear exactly who you are supporting with your money.
For detailed information on the investment options we have available for members – contact Nationwide Super today.