As awareness of social and environmental issues continues to grow, more and more investors are seeking ways to align their financial goals with their ethical values. One way to do this is through investing in ethical managed funds, sometimes referred to as socially responsible funds or sustainable funds. These funds allow investors to put their money into companies that adhere to certain ethical, social, or environmental criteria, while still seeking financial returns.
Ethical managed funds have been around for several decades, but they have gained popularity in recent years as sustainable investing has become more mainstream. According to a report from the Global Sustainable Investment Alliance, assets in sustainable and responsible investment funds reached $30.7 trillion in 2018, a 34% increase from 2016. This growth demonstrates the increasing interest in aligning investment decisions with ethical considerations.
One of the main reasons investors are turning to ethical managed funds is to make a positive impact on the world. By investing in companies that are committed to sustainable practices, responsible governance, and social justice, investors can support businesses that are making a difference in their communities and the environment. This can be especially appealing to those who want to use their money as a force for good and contribute to positive change.
Another benefit of ethical managed funds is the potential for financial performance. Contrary to the belief that investing ethically means sacrificing returns, many studies have shown that sustainable investing can actually outperform traditional investments in the long term. For example, a study by Morgan Stanley found that sustainable equity funds outperformed their traditional counterparts in 64% of cases.
In addition to the potential for financial returns, ethical managed funds also offer diversification benefits. By investing in a fund that includes a range of companies committed to sustainability, investors can spread their risk across different sectors and industries. This can help mitigate the impact of economic downturns or market fluctuations on their investment portfolios.
One of the key features of ethical managed funds is their screening process. Before including a company in the fund, ethical investment managers will conduct a thorough analysis of the company’s environmental, social, and governance (ESG) practices. This screening process helps ensure that the companies in the fund meet certain ethical criteria and align with the values of the investors.
There are different approaches to screening companies for ethical managed funds. Some funds may exclude companies involved in industries such as tobacco, weapons, or gambling, while others may focus on companies with strong track records in areas like environmental sustainability or human rights. Some funds may also engage with companies to encourage improvements in their ESG practices.
In addition to screening companies, ethical managed funds also engage in active ownership. This means that the fund managers will actively participate in shareholder meetings, vote on resolutions, and engage with company management to promote positive change. By using their influence as shareholders, ethical fund managers can encourage companies to adopt more sustainable practices and improve their ESG performance.
Overall, ethical managed funds offer investors a way to align their investment goals with their ethical values. By investing in companies that are committed to sustainability and social responsibility, investors can make a positive impact on the world while potentially earning competitive returns. With the increasing interest in sustainable investing and the growing availability of ethical managed funds, investors have more opportunities than ever to invest with a conscience. So, consider ethical managed funds as a way to make a difference while also growing your wealth. Investing in ethical managed funds may be a decision you won’t regret.