“Values are like fingerprints. Nobody’s are the same, but you leave them all over everything you do.” – Elvis Presley.
Your ethical values are not something that only live in your mind; they come through your actions, the words you say, the people you spend time with, and of course, how you spend your money. As a vegetarian, you probably don’t want your money to be supporting meat companies. As an environmentalist, you definitely don’t want to help fossil fuel companies grow bigger.
Luckily, many people are thinking along the same lines, and thanks to ethical investing, you can now “put your money where your mouth is”.
What is ethical investing?
Put simply, ethical investing means investing your money in a way that aligns with your own personal values. This includes animal welfare, environmental issues, sustainable energy, employee rights, tobacco and religious religions. Usually, it means investing or not investing in certain companies in the stock market.
Money is what moves the world, and choosing where to put your money can have a larger impact than you might think. That’s because investments do more than make money: they can actually make a difference for good. Putting your money in specific places is what gets large institutions, companies and even governments to take notice.
Is ethical investing possible?
Yes, and it’s a lot easier now than it was decades ago. People are prioritising ethical investing a lot more than they used to.
According to Morningstar, ethical investing is not only possible but even profitable. Sustainable funds in 2019 outperformed normal ones, and as more investment funds like Blackrock commit to investing sustainably, the trend will be increasing even more.
The difficult part is figuring out how to invest your money ethically – and that’s what we’ll be covering in the rest of the article.
What are the best ethical investments?
This is the most common way to invest ethically: through Environmental, Social, Governance portfolios. These are portfolios that are also called impact investing, SRI or sustainable investing. They are issued by investment companies and involve you buying stocks in companies that follow their criteria for being ESG. There are two main ways to offer ESG portfolios:
- Omission: eliminating companies that don’t follow the criteria from the portfolio
- Creation: creating a new fund with specific companies
The advantage of this investing strategy is that someone else is doing the research and will help you build a portfolio that makes a good return over the years. Although this is the most common method and easiest way to invest ethically, the truth is that you cannot be completely sure where your money is going. ESG means different things to different people: is tobacco included? Fossil fuels? What about oil and gas? You’ll still need to do your research, and make sure you don’t overpay in fees!
Like an ESG fund, with stock picking, you are putting your money into companies that you believe are socially responsible. This time, you are in control of where your money is going since you get to pick the companies.
Although likely to be the truest form of ethical investing, the main issue with stock picking is unless it’s your hobby or job, you won’t have the time or energy to do the research. And unless you are a professional stock trader, it’s unlikely you’ll beat the market over time. That’s why it’s important to have a balance of ethical investing, while still being able to grow your investments over time.
Gold is an excellent ethical investment for a few reasons:
- Does not involve tobacco, alcohol, animal rights testing or other harmful industries
- You know exactly where your money is going
- Your investments beat inflation and grow over time
Gold is also Shariah compliant, and therefore a perfect add-on if you are building a portfolio that follows Islamic law.
You’re probably thinking: isn’t mining gold bad for the environment? Sure, it’s no secret that mining gold does involve transporting heavy machinery, environmental damage and some waste. That is certainly not ESG.
However, the London Bullion Markets Association (LBMA) committed to a Responsible Sourcing programme in 2012, to encourage gold mining companies and dealers to source gold ethically. This type of mining is designed to minimally affect the environment whether it’s through excavation, transportation or managing waste.
At Minted, we are proud to say that the gold refinery that we are partnered with, Nadir Rafineri, is part of LBMA’s Responsible Sourcing programme, and therefore all the gold we sell is also responsibly sourced.
If you buy gold from a responsibly sourced dealer, you can then enjoy the benefits of holding a safe haven for your portfolio, beating inflation and effectively investing in a way that is aligned with your morals.
How to start investing ethically
1. Determine your values
Ethical investing means different things to different people: what are your values? What do you believe the world should focus more on? What do you think we should stop funding immediately? Once you know what your values are, it’ll be easier to determine where to put your money and your preferred way of investing ethically. You also want to consider what your financial goals are: if you want to make the highest return on your money, for example, you may want to stay away from stock picking.
2. Decide how to invest
Now that you know what your values are, it’s a lot easier to know how to invest. You can decide to open an ISA and invest through an ESG fund that will ensure you maintain a high return over time, or decide to buy gold to make sure your portfolio is diversified and protected. The good news is that you can mix up your portfolio so you have exposure to both stocks and the precious metal.
3. Decide how much you want to invest
When it comes to buying gold, we usually recommend a gold allocation of between 5 – 10% – although this depends on various factors at the moment of investing. You can then choose to invest the rest of your funds in ESG funds from other investment brokerages. However, make sure to keep your fees low and that you’re able to find out as much as you can on the companies the fund invests in.
Why is ethical investment important?
As we mentioned above, investments can do a lot more than just make money: they can make an actual difference. By choosing to invest ethically, you can be sure that your money is doing the best it can and you are making the largest impact possible.
Values are part of your personality, which is why it makes sense to keep it consistent across your money, friendships, work and more. With ethical investing, you can be sure you’re making the most of your money in every sense of the word. Interested in getting started with gold? We can help you!