Sustainable investing has become increasingly popular as the world becomes more focused on creating positive effects on the environment. Following the coronavirus outbreak and the increasing focus on climate change, businesses emphasize contributing to a cleaner, greener world. A big part of these efforts has been the cultivation of steps like sustainable investing, and investing in socially-conscious companies that bring more good than harm into society.
Being “ethical” in your investment decisions might sound vague. After all, everyone has a different moral compass and hierarchy of what matters to them. Although many ethical debates exist, some concepts are universal. With sustainable investing, the agreeable concept practiced is the idea of following the Golden Rule, or in other words, not to harm.
If you’re confused by what is meant by “more good than harm,” we truly understand! Here, we discuss information on what ethical investing can offer companies and investors and what it can do for society and the planet. To learn more about this form of socially-conscious investing, read on.
Defining Ethical Investing
In a nutshell, ethical investing is the process by which investors with a socially-conscious mindset seek to invest in companies that promote the most good to society. Ethical investors use various methods to weigh the pros and cons of a company’s efforts and decide which businesses to invest in. They decide which companies are the most sustainable based on a list of companies in their investment portfolio. Sustainability (another vague term) is used in this context to consider ethical investing by providing the greatest, longstanding positive impact on people and the planet.
Combining Profit With Purpose
Some investors take things a step further and combine profit with purpose. In other words, once a company has been determined to be a sustainable investment, it is safe for the investor to focus on the financial aspects. Ideally, ethical investing maximizes profit with a social purpose. A business’s economic value should be balanced with significant social value.
Ethical investors can look at the contributions companies make, such as giving back through charity work, donating to local organizations, and supporting their employees. Ethical investors review these efforts to determine how significantly businesses promote social value. Comparing these outcomes to profit can help an investor decide if the social benefits are enough to pursue profit.
How Does The Golden Rule Apply?
Regarding ethical investing, the Golden Rule to do no harm is applied by doing the least amount of harm. Unfortunately, most companies contribute some negative global impact simply because every business decision has at least one consequence or negative effect. While some of these things are unavoidable, companies can improve their efforts to make mindful decisions for society and the planet.
Ethical investors look for companies that follow the Golden Rule as best as possible to back their ethical investing decisions. They may look into business operations, policies, and other protocols to see how companies execute their efforts. From there, ethical investors come to their final decisions on whether they can make ethical investing decisions with said companies. Ethical investors can also look at the overall effects of business products and services and the methods they use to bring these things into the world.
How Do Investors Know They’ve Made Smart Decisions?
Ethical investors can decide which companies are the smartest to invest in and which to avoid using a series of strategies. An experienced investment firm may help newly established ethical investors quantify the companies under consideration and finalize ethical investing decisions. There are research-backed ways that investors quantify their investment opportunities. Comparing the U.S. dollar to human lives and a process called quantification, ethical investors make some critical comparisons to determine whether investing in a said company would indeed be an example of ethical investing.
Start Your Journey With Ethical Investing
By following The Golden Rule, you can begin to organize companies based on how well they contribute to society and make your final decisions with the help of an ethical investing firm. It will take more than the Golden Rule to guide your ethical investing decisions, but following it gives you a roadmap to start your journey as an ethical investor.