There has long been a debate about whether investors should invest based solely on financial returns or consider other non-financial factors such as social factors, the environment or governance. Ethical investing is an investment strategy where investors choose to invest based on their moral code.
Therefore, ethical investment funds tend to support companies that positively impact society and the environment. Such companies include those that strive to create sustainable energy and pose lower investment risks. And with the increase in ESG funds, there are several ethical investments into which you can venture.
Even though no investment guarantees profits, ethical investors tend to be at a lower risk of making losses than other kinds of investments. Below are proofs that you can still profit with an ethical investment fund.
No Fines Associated with Ethical Investments
Companies that behave ethically have long avoided the fines imposed by the government due to environmental damages. And the more a company avoids penalties, its profit margins increase. Ethical companies also uphold their employees’ rights which means that they are more likely to have loyal and productive employees as they are treated well and are more motivated to work hard.
There are fewer legal issues between employees and employers, and the company is also less likely to face lawsuits or even a loss of reputation due to the production of substandard products or harmful products, which guarantees profits to their investors in the long run.
Portfolio Investing Attracts Good Returns
In ethical investment funds, a portfolio comprises companies with high environmental, social and governance standards. This means each company is accessed and has met the ESG scores, thereby contributing to higher financial returns of the overall portfolio.
It is also evident that companies that pay attention to ESG factors have low risks of financial loss. And because an ethical investment fund comprises such companies, your investment is guaranteed to have profits. Ethical investment funds also have diversified portfolios, which means that all sectors are screened to ensure investors benefit significantly from this diversity.
Consumers Are More Satisfied With Their Products
Consumers tend to support those companies that care most about their well-being and the environment. Companies that behave irresponsibly concerning ESG factors may indeed have short-term gains, but in the long run, ethical investments outperform them. Ethical investment has also been shown to be more resilient to market fluctuations or extreme market volatility.
Summary
With impact investment taking a significant share of the market today, it is no doubt that investors can make profits when they venture into an ethical investment fund. Some of the reasons for this is that fewer fines are imposed on companies that invest ethically, simply because these companies are faced with fewer lawsuits regarding environmental damage.
There are also no legal issues between the company and the employees because their rights are highly upheld. Portfolio diversification in ethical investment funds also guarantees high returns as the risk for investing is spread throughout the portfolio and not based on one company. Consumers are also more satisfied when buying from socially responsible companies.
