Making your money work for you doesn't mean you have to compromise on your principles.
Ethical investing has moved from the fringes to the mainstream in recent years, with more people than ever building portfolios that reflect their personal values and desire to make a positive impact while still aiming for healthy returns.
Understanding ethical investing
At its core, ethical investing means putting your money into companies and funds that align with your moral compass. This might mean avoiding industries you find problematic (like tobacco or weapons manufacturers) or actively seeking out businesses making positive contributions to society and the environment.
You'll often hear terms like ESG (Environmental, Social and Governance), SRI (Socially Responsible Investing), and impact investing (which targets a particular positive outcome) thrown around. While there are subtle differences between these approaches, they all share the common thread of considering more than just financial returns. And increasingly, investors are discovering they can make money while making a difference.
Getting started with ethical investing
Before diving in, take some time to reflect on what matters most to you. Are you passionate about climate change? Human rights? Animal welfare? Your personal values should guide your investment choices.
Once you've identified your priorities, you have several options:
- Ethical funds pool your money with other investors to spread risk across multiple companies that meet specific ethical criteria. Many UK investment platforms now offer dedicated ethical portfolios, making this a straightforward entry point.
- Individual stocks give you more control but require more research. You'll need to dig into company reports and perhaps use screening tools to ensure businesses truly match your values.
- Pension adjustments shouldn't be overlooked. Check if your workplace pension offers ethical options – many now do.
The performance question
"But will I lose money?". This remains perhaps the most common concern about ethical investing. The good news is that ethical investments often perform as well as – and sometimes better than – traditional investments over the long term.
Companies with strong ESG practices tend to be better managed and face fewer regulatory and reputational risks. That said, as with any investment, past performance isn't a guarantee of future returns, and your portfolio should be diversified appropriately.
Avoiding ‘greenwashing’
As ethical investing has grown more popular, so too has ‘greenwashing’ – where companies or funds exaggerate their ethical credentials. To avoid this, look beyond marketing materials and examine the actual holdings within funds. What companies are they investing in? What percentage of ‘green’ investments do they truly hold?
Take the first step
Ethical investing isn't about perfection – it's about progress. Even small shifts in your investment strategy can contribute to positive change while still working toward your financial goals. By asking more questions about where your money goes, you're part of a growing movement reshaping how finance works for everyone's benefit.
Remember, this is your journey – one that balances personal values with practical financial planning. With the right approach, you can indeed do well by doing good! To find out how, give us a call on 0345 450 4660.
The value of investments and any income from them can fall as well as rise and you may not get back the original amount invested.
Approved by The Openwork Partnership on 17-07-25.
