Ethical investments are increasingly gaining attention. Investors are more aware and conscious of the negative impacts stemming from traditional approaches to investment, such as unethical practices and deforestation. Ethicality is an investment strategy that is both morally responsible and financially rewarding.

Ethicality in investment is characterized by selecting an investment portfolio of organizations that have a positive environmental and social impact. Sustainable investors are concerned with companies whose profits benefit not only stockholders but society. Ethicality drives investors to create a portfolio based on their values on what change they want in the community and filters out causes they do not support.

Read on to learn more about ethicality in sustainable investment.

How You Define Ethicality

Ethicality is a broader concept associated with making many ethical choices. How you define ethicality is a highly personal opinion depending on religious, cultural, societal, and moral factors. But while there are countless approaches and definitions of what is ethical, a golden rule cuts across the philosophies – treat others how you would want to be treated. The core of ethicality is being good to others.

Sustainable investors approach ethicality in investment by believing they can generate measurable and meaningful societal impact while also gaining a healthy profit. Ethical investment motivates companies to observe and comply with the golden rule.

The Relationship Between Ethical And Sustainable Investing

As established, ethical and sustainable investing are terms used when describing the practice of using your investment funds to gain a positive impact on society. The terms are often used interchangeably depending on how you define ethicality, but is there a difference, and what is their relationship?

What is sustainable investment?

Sustainable investments are a strategy where investors channel funds to companies that uphold sustainable business practices. The following ESG principles govern these investments:

  • Environmental: Companies with stable environmental policies that eliminate and reduce dependence on non-renewable sources of energy.
  • Social: Companies with social efforts work on racial and gender equity in their workplace, community, and serving customers. Others go beyond by active involvement in social causes through volunteerism and making donations.
  • Governance: Companies with solid governance policies on how the executive and board work together, how leaders are paid, and how the finances are audited and overseen, among other things.

What is an ethical investment?

A lot of factors overlap between ethical and sustainable investments. The primary distinguishing factor is that ethical investments are far more personal. The strategy involves making investment choices based on personal values ranging from moral, social, cultural and religious beliefs.

An example would be avoiding investment categories like firearms, alcohol, or gambling due to personal beliefs. While sustainable practices are standard, ethicality is highly individual. One investor’s ethical portfolio can differ entirely from another’s, depending on how you define ethicality.

The Importance Of Ethicality In Sustainable Investment

Ethicality in investments promotes positive change. Actively supporting companies with shared ethical principles motivates other companies to follow suit. Your investments also carry a more significant impact since many sustainable and ethical initiatives have longer-term benefits.

There’s a myriad of possible benefits depending on how you define ethicality; other advantages include:

  • Promoting social justice and fairness
  • Reduces environmental pollution and degradation
  • Promotes safe and healthy working conditions for workers
  • Prevents unethical practices like corruption and bribery
  • Support the global shift to an economy that is more sustainable
  • Fosters diversity in business leadership and ownership
  • Supports local communities by investing in community projects and small businesses

Make Worthy Investments

No rule stops you from feeling good about your investment while making money. Look into sustainable investing if you wish to seed into companies that have strong ESG values. Go further into your values by creating an ethical portfolio to choose what causes you want to support and those you don’t want to. Make worthy investment choices.