Making profit with a clear conscience

Published in the Daily Telegraph, July 2014 by Dale Gillham

For many investors the decision to invest is typically about how much you can make, and not how ethical an investment is. 

However, research conducted in 2013 suggests that as a society our views are slowly changing.

The research identified that more than 60 per cent of the investors surveyed believe that their superannuation investments ought to be aligned with their values.

So what is ethical investing? 

The ASIC Money Smart website defines ethical investment as: “Promoting positive environmental, social or ethical issues. 

Avoid investments in industries or companies that produce goods harmful to health, society or the environment.’’

Major environmental disasters caused by corporations, the global financial crisis, sweat shops making clothes and companies facing class actions for failing to act ethically by reporting material information to the market are driving our opinions.

So how do we choose shares or managed funds that are ethical, sustainable and or socially responsible?

More importantly, how do we find the ethical ones that deliver good returns?

Selecting an “ethical” fund is not as easy as forming a view on the terms ethical, sustainable or socially responsible as you may give different meaning to these terms than the fund manager. 

So before investing you need to be carefully read the Product Disclosure Statement (PDS) or research the share you want to invest in.

Here are some tips:

  • Research the terms so you understand what ethical investments are;
  • Document your values — what does ethical investing mean to you;
  • Get a list of the top 50 shares on the Australian market from the Australian Securities Exchange (ASX) website, and look up their business policies to see if they match your ethics; and
  • Read newspapers, websites or subscribe to newsletters covering ethical investments.

Based on your above research:

  • Set the criteria for selecting your investments;
  • Make a list of industries or companies you believe are not ethical and steer clear of these; and
  • List companies you believe are ethical investments, or are aligned to your values.

Remember, your aim is to make a profit ethically, so when investing look for companies that have either an established financial track record, or earnings forecasts that indicate potential for growth over the next one to two years.

If the company looks good but the share price is going down, wait for the smart money to get behind the share. This means the stock must be rising over at least a couple of months.

To learn how you can gain the required knowledge and skill to ensure your success in the share market click here.

Back to Articles