So, you’ve switched your super to an ethical fund, you’re feeling good about your decision, and you’re ready to invest the rest of your money ethically too. Now you’re probably asking yourself: where to start?
Don’t worry, you’re not alone. At Verve we live and breathe ethical investing, so we’ve got your back!
More than ever before, Australians want their money invested ethically. The latest research shows that nine in ten Australians expect their super and other investments to be invested responsibly and ethically.
The problem is, most investment funds -even some with so called ‘ethical offerings’- invest in companies that generate social and environmental harm, often without the knowledge of their investors.
How we invest our money, and the future world we choose to finance, is one of the most important ethical considerations we will ever make.
As Australian women, we already hold over $1 trillion in superannuation alone! It’s an enormous amount of wealth to shape the future we want.
The good news is that there are more options for ethical investing than ever before, and the research is clear –there is no need to compromise your values for strong returns. With ethically invested funds in Australia out performing the market over three, five and ten year time periods.
So here are our top tips to building your wealth and living in line with your values through ethical investing!
Terms such as ethical investing, sustainable investing, Environmental, Social and Governance (ESG) criteria, and socially responsible investing often mean different things to different people.
There’s only one person who should define the ethical standard of how your money is invested: You!
So, this is the fun part: pull out a piece of paper, or open a google doc., draw a line down the middle, and think about the future you want to be living in – fast forward 10, 20, 30 years and imagine that world. On one side of the page, jot down the kind of industries and companies you want to see flourish (think: healthcare, education, renewable energy, sustainable food production, etc.), on the other side of the page write down the industries you don’t want your money to support (think: tobacco, armaments, gambling, coal and gas, etc.).
Ethics and values are personal, so take time to understand what is important for you and your family. If you share your finances with a loved one, this is a good activity to undertake together. If you’re a mother (or father) this can be a great activity to involve your children in –you can even ask young children to draw the world they want to grow up in.
If you need some inspiration, check out the types of industries and companies that Verve invests in and what we avoid.
Jargon buster: ‘positive investments or screens’ are the types of investments that a fund actively tries to invest in and ‘negative screens’ are the investments that a fund manager avoids. If you’re investing in any type of good ethical fund, this information should be easy to find on their website.
Before you make any investment you need to have a plan. You should know how much money you want to invest, how long you intend to have it invested and what your appetite for risk is vs. the potential returns. In setting your plan you should also have an understanding of how long you want to invest your money for.
The Government’s Money Smart Website has some great advice for setting an investment plan. Or, if you are a Verve Super member, check out our Verve Academy e-coaching Money Mindset module on Share Investing.
At Verve, we don’t advise beginner investors to pick and choose individual companies to invest in. For beginner to even moderately experienced investors, we generally suggest choosing a diversified fund consisting of many different investments to reduce risk.
Luckily there are some great ethical funds out there, with excellent performance!
The key to de-risking any investment portfolio is to have a diversified portfolio, through ethical funds you can buy a small fraction of many companies (think about owning shares in Tesla, wind power technology, healthcare and education companies all through one fund).
Ethical Exchange Traded Funds (ETFs) are a great way to get started, because the fees are generally lower than traditional managed funds and you can trade them through the Australian Stock Exchange (ASX).
To buy shares in an ETF, you will need to have a trading platform (most large Australian banks have these so have a look on your bank’s website -or give your bank a call). You can also find some good low fee platforms online. Due to fees associated with buying and selling shares, it generally makes sense to have at least $500 – $1,000 before you start investing.
Canstar has analysed the performance of a number of different ethical funds –there are other comparison websites out there as well, you can also do your own analysis by looking at:
Remember, past performance isn’t a guarantee of future performance.
The Canstar comparison website has a good list of strong performing ethical funds. One of our favourite ethical ETFs is BetaShares Global Sustainability Leaders Fund -a global ethical fund, with relatively strict ethical criteria and a focus on sustainability. It is listed by Canstar as one of the top performers in 2018 and charges an annual management fee of 0.59%.
There are other ethical comparison sites out there and a number of ethical ETFs and Managed Funds to choose from, so do some research and enjoy the process. The most important thing is to get started, and give it a go, here’s why!
If you’re a Verve member you can learn more about investing ethically and the practical tips to get started through our Share Investing e-coaching module in the Verve Academy, otherwise the Money Smart website has some great resources, explaining both Managed Funds and ETFs.