Today, we are faced with the challenge of addressing growing awareness and concern around the impact of our investments on society. The recent rise in popularity of social and responsible investing has made it possible to invest according to one’s values.
However, these investment options still need to be utilized or available for most investors.
Investing ethically is beneficial not only because you can align your portfolio with your values, but also because it can help you achieve a higher long-term return on your investment. Ethical investing may have a positive impact on society as well – especially if more people choose to invest with ethicality in mind.
Let’s take a look at why you need to consider investing ethically.
Investing Responsibly is a Legitimate Investment Strategy
Investing responsibly is a legitimate investment strategy that has proven beneficial in the long run for the investment portfolio and society at large. By focusing on long-term returns, investors can avoid the short-term fluctuations inherent in the stock market. This strategy allows investors to stay the course and focus on the big picture.
It Helps You Achieve Higher Returns Over the Long Term
While socially responsible investing starts with choosing investment options that align with your values, it doesn’t end there. It’s also important to consider how these investments will perform over time. After all, your investment portfolio is the tool that will enable you to achieve your goals.
Which investment strategy do you think is better for your portfolio in the long term? Which strategy would you recommend to your children and grandchildren?
The simple truth is that investing ethically will help you achieve higher long-term returns on your investment portfolio. Below are some key reasons why:
- You can focus on investing in long-term profitable investment opportunities
- You can minimize your exposure to risk
- You can minimize your exposure to unethical companies
It Shapes Company Behaviour and Improves Society
The long-term performance of your investment portfolio is important, but so is its impact on society.
When you invest ethically, you have a voice that can impact company behavior. You can make your values heard by communicating your expectations to the companies you invest in. When enough investors do this, companies will respond by resetting their strategy in line with their shareholders’ values.
For example, when more individuals invest ethically, companies are more likely to ensure that their supply chains are free from human rights violations and that their products are ethically produced.
With the recent rise in media coverage on climate, water, and social-related risks, investors are increasingly taking note of companies’ ESG performance.
Investors want proof that companies understand the risks associated with unsustainable business practices and have adopted policies and procedures accordingly. They also want evidence that management is implementing effective sustainability policies and monitoring performance regularly – not only now but also into the future.
Therefore, listed companies must demonstrate their commitment to responsible business practices or risk alienating investors, who are paying more attention to sustainability and responsible investing.