Quarter in review Global equities advanced at the start of the quarter amid signs of easing inflationary pressures, resilient economic data, and growing
Design the life you want.
Contact Wealth Architects today to discuss your financial goals and how we can help you get there.
Navigating Ethical Investing: Insights from Wealth Architects
Investing is a crucial component of financial planning, and it is essential to invest in a way that aligns with your values and principles. With ethical investing gaining popularity, more and more investors are seeking to make a positive impact through their investments.
At Wealth Architects, we understand the importance of investing in a way that aligns with your ethical principles, and we are committed to helping our clients navigate the complex world of ethical investing. In this article, we will explore what ethical investing is, how to ethically invest, and whether ethical investing can provide better returns.
Join us as we share insights from our Senior Financial Adviser, Chris Herdman, and gain a deeper understanding of ethical investing and how Wealth Architects can assist you in achieving your financial goals in an ethical and responsible way.
“I understand that everyone is on a different financial journey and tailor strategies to meet my client’s individual goals in order to provide enhanced outcomes. I pride myself on building strong connections with my clients while delivering a rewarding experience. My ethos is that the role as a financial adviser is not only to educate my clients to make informed decision but to instil confidence to allow them to take action towards achieving their financial freedom.”
Chris Herdman, Senior Financial Adviser at Wealth Architects
What is ethical investing?
Ethical investing, which is also referred to as socially responsible investing (SRI), involves investing in companies or funds that are in line with an individual’s ethical principles or values. This approach entails being mindful of the impact your investments have on the world and how your money is being invested.
There are several types of ethical investing that Wealth Architects can assist clients with, depending on their values and preferences.
Negative screening involves excluding companies or sectors that do not align with a client’s values. For example, a client may choose to exclude companies involved in gambling or weapons manufacturing.
Positive screening involves investing in companies or funds that have a positive impact on the environment or society. For example, a client may choose to invest in companies that are actively working towards reducing their carbon footprint.
Best-in-class screening involves investing in companies that are considered the best in their industry in terms of environmental, social, and governance (ESG) practices. This type of screening considers companies that may not be perfect in terms of ESG practices, but are still leading the way in their industry.
Ethical investing has several benefits, including:
- Aligning your investments with your personal values
- Encouraging companies to improve their ESG practices
- Potentially producing similar or better returns compared to traditional investing in the long-term
At Wealth Architects, ethical investing is not just about doing the right thing, but it is also about making sound financial decisions that align with your values. Our goal is to help clients achieve their financial goals while also making a positive impact on the world.
How do I ethically invest?
Investing in alignment with your values and principles is an important decision that requires careful consideration. Here are some steps to help you ethically invest:
The first step in ethical investing is to identify your values and principles. What issues are important to you? Do you have any areas that you would like to avoid investing in? This will help you determine the type of ethical investment approach that you would like to take.
Once you have identified your values and principles, it’s time to research ethical investment options. There are many different types of ethical investment approaches, as outlined in the previous section, and it’s important to find the approach that best aligns with your values.
Working with a financial planner can be extremely helpful in navigating the world of ethical investing. They can help you understand the different investment options available and how they align with your values. Additionally, a financial planner can provide guidance on how to build a diversified portfolio while still adhering to your ethical principles.
The role of a financial planner in ethical investing is to help you make informed investment decisions based on your values and principles. They can provide you with information on ethical investment options and help you determine which options align best with your values.
Effective communication and alignment between client and planner is essential in ethical investing. It’s important for the planner to understand the client’s values and principles so that they can make recommendations that align with those values. Additionally, the planner should communicate any potential risks or drawbacks associated with an investment option so that the client can make an informed decision.
Is ethical investing better for my returns?
When considering ethical investing, one of the most common questions investors ask is whether it will provide the same returns as traditional investing. While ethical investing may prioritize principles and values over profits, it is still a legitimate form of investing and can generate competitive returns.
In fact, many ethical investment options have been known to perform just as well, if not better, than their non-ethical counterparts. A study conducted by the Morgan Stanley Institute for Sustainable Investing showed that sustainable equity funds had similar returns to traditional funds between 2004 and 2018.
Returns in ethical investing can be affected by a range of factors, including the specific ethical investment approach taken, the sector in which the investment is made, and the overall economic and market conditions at the time of investment.
However, as with any form of investing, ethical or otherwise, it is important to take a long-term investment horizon. In the short term, returns may fluctuate due to a range of factors, but in the long-term, well-governed and ethical companies have historically produced greater outcomes.
Ultimately, the decision to invest ethically should be based on an investor’s personal principles and values, and the potential returns should be considered alongside these principles rather than as the sole determining factor.
In the next section, we will discuss how ethical investments are screened to ensure they meet specific ethical standards.
Examples of ethical investing options
There are various ethical investing options available, each with its own unique approach. Here are some examples:
Environmental, Social, and Governance (ESG) Investing:
ESG investing involves evaluating companies based on their environmental, social, and governance practices. ESG investors analyze factors like a company’s carbon emissions, labor practices, board diversity, and executive pay to determine their investment potential.
Socially Responsible Investing (SRI):
SRI is an investment approach that seeks to align investments with the investor’s ethical and social values. SRI investors screen out companies involved in activities such as tobacco, alcohol, gambling, and weapons manufacturing. They also invest in companies that prioritize environmental sustainability, social justice, and other values.
Impact investing is an investment strategy that aims to generate positive social and environmental impact, as well as financial returns. This type of investing typically involves investing in companies, organizations, or funds that are actively working towards social or environmental goals. Impact investors measure their returns based on the positive impact generated by their investments.
These are just a few examples of ethical investing options available. It’s important to work with a financial planner such as Chris, who can help you identify investment options that align with your values and goals.
Discover more about ethical investing with Wealth Architects
Ethical investing is a way to align your investments with your personal values and principles. As discussed, there are various ways to approach ethical investing, including negative screening, positive screening, best-in-class, ESG investing, SRI investing, and impact investing. It is important to research and identify ethical investment options that align with your values and work with a financial planner to ensure that your investments reflect your principles.
At Wealth Architects, we understand the importance of ethical investing and work with our clients to create investment portfolios that reflect their values while achieving their financial goals. Our approach includes a screening process and criteria, the identification of companies and sectors that align with ethical investing principles and creating diversified portfolios that adhere to ethical investing principles.
We encourage you to take action and explore ethical investing options with Wealth Architects. Our team of experienced financial planners can provide insights and guidance on ethical investing, helping you align your investments with your values and principles. Together, we can create a better future through responsible and sustainable investing.
Chris is a fully qualified Financial Adviser, and is authorised to provide advice on the products listed below:
- Fundamentals of budgeting, cash flow management and estate planning.
- Superannuation Advice including investment strategy, consolidation advice, contribution strategies, beneficiaries and insurance arrangements.
- Wealth Protection including personal insurances held inside and outside of superannuation – Life, Total Permanent Disablement, Income Protection, Trauma & Child Cover.
- Wealth Creation including investment advice, education bonds, investment bonds, managed funds, tax effective structures and modelling forward projections.
- Debt management including debt recycling and debt repayment strategies.
- Retirement planning including preparing, entering and living in retirement with Centrelink modelling.
Financial Services Products:
- Deposit and payment products
- Financial planning
- Life risk insurance products
- Managed investments
- Tax effective investments
- Superannuation and retirement savings accounts
Have a Question for Chris?
If you’re looking to secure your financial journey or would like an obligation free chat, contact Chris on the details below or via the contact form.
Chris Herdman BFinPlan, AFA FChFP
Senior Financial Adviser
16 Trinity Lane, Woolloongabba, QLD, 4102
M: 0405 736 837
Connect with us on Social Media to read the latest industry news and learn what Wealth Architects is up to.
Planning for your later years can be a daunting task, especially when it comes to deciphering the differences between retirement living, aged care, and the in-between options.
Recently, the Australian Prudential Regulation Authority (APRA) carried out its annual performance assessment on superannuation products. The results disclosed that certain funds are significantly underperforming.
End of Financial Year (EOFY) is a pivotal time for Australians to reassess their finances and look for opportunities to maximise their financial security. With key changes in superannuation laws and the indexation of the Total Super Balance (TSB) cap to $1.9 million, there are unique opportunities and challenges ahead. Let Wealth Architects guide you through these complexities with personalised financial advice designed to optimise your financial future.