When it comes to investment, making a profit has, traditionally, always been the driving force behind investor’s decisions. Whilst this is crucial to having a chance of success when investing, it is fair to say that many investors are now considering more factors when choosing where to put their money.

Ethical investment is a mindset/philosophy which is truly gaining traction in the modern era, with many investors now interested in integrating into their day to day investment strategy. Here is an explanation of ethical investing, as well as some considerations about its use as a strategy.

ESG Integration

Ethical investment is also sometimes referred to as responsible investing, and usually involves applying ESG principles to an investment strategy. ESG stands for environmental, social and governance, which essentially act as the criteria applied to each investment (in addition to profitability/individual investment goals).

An investment in a company which relies heavily on fossil fuels or promotes their use, for instance, would not usually be considered by an investor applying ESG integration, because that company would be damaging the environment by contributing towards climate change.

A Better World

Different investors will have different boundaries when applying these principles, but the goal of ethical investment is to contribute towards creating a better world whilst still being able to make a profit. Even specialist firms involved in investment, such as Wellington Management Funds, are also likely to adopt ethical principles as the appetite for investing ethically continues to grow around the world.

As such, one of the greatest benefits of ethical investment is that it directs money from around the world towards companies/ventures which are likely to have a positive impact one way or another.

Profitability

Currently, choosing only ethical investments almost certainly means reducing profit potential as an investor, given that non-ethical but potentially profitable choices have to be filtered out when selecting something to invest in.

That being said, it is worth noting that more and more companies are taking global issues seriously, and ethical investment could be driving them to improve their policies and behaviours with regards to social, environmental and governance factors. Ultimately, though, as long as the profitability of each investment made is taken into consideration, it is still an effective/profitable strategy overall.

The Future of Ethical Investment

Ultimately, the world is changing at a rapid pace, as are attitudes towards important issues facing humanity. As such, ethical investment continues to grow and thrive each year as an investment strategy, suggesting that it has a very bright future ahead of it.

It seems inevitable that the investors of tomorrow will pay much more regard to ethical factors with each investment they make, meaning that socially responsible companies may grow at a faster rate, and have more opportunities to make a positive impact on the world.

The rise of ethical investment shows just how much investment philosophies are changing as the issues facing the global population become ever more prevalent. Time will tell how far the collective investment community are willing to take this fairly new strategy, but it is not beyond the realms of possibility that ESG factors will one day be the main driving force behind investment decisions.

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