InvestorQ : What is Ethical investing and is good?
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What is Ethical investing and is good?

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Anu Biswas answered.
11 months ago
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Ethical investing is a strategy where an investor chooses investments based on a personal ethical code. Ethical investing strives to support industries making a positive impact, such as sustainable energy, and create an investment return. With an increase in ESG funds, there are more ethical investments than ever. Of course, what is “ethical” depends on the person. What is ethical to you may not be to someone else.

Ask 10 people about ethical investing and you will get 10 different responses. However, most would agree that consideration of non-financial objectives along with financial ones – whether to do social good or gain an investment edge – is part of the definition. While all of this sounds warm and fuzzy, many people wonder if socially responsible investing is a winning investment strategy. Unfortunately, there is no perfect answer to that question. Though it is entirely possible that investments in socially responsible companies will provide investment returns comparable to the general market, these businesses experience the same ups and downs like anyone else.

Ethical investing isn’t a bad thing. It does help companies gain access to capital to grow and fund their CSR (corporate social responsibility) programs. It also gives investors the ability to influence business operations and practices towards their personal values and ethics. This sometimes comes at a cost of lower financial returns on their portfolio, but the tradeoff for other benefits makes it worthwhile.

What constitutes socially responsible investing is not always universal. Perhaps the best example is nuclear energy. If viewed from a perspective of damage from nuclear accidents, it might be seen as one of the worst investments possible. But if it is considered to be a substitute for fossil fuels, it could constitute a socially responsible industry.

There is are many grey, uncharted areas as far as ethical investing is considered. And the definition of doing good may be different for different people. Ultimately, an investor chooses to ethically invest when they want to make a difference in society. Their primary goal from the investment is to meet their moral, social, and religious values, while returns are secondary.
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