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Women Are Paving the Way with Their Ethical Investment Choices: Here’s Why It Makes Good Financial Sense

Ethical investments have grown in popularity in recent years and have experienced tremendous growth due to increased awareness of their potential. Ethical investors are interested in values such as climate change, workers’ rights, gaming, diversity and gender equality. Currently, the number of funds that comply with Environment, Social and Governance (ESG) principles exceed £1trn.

What Is an Ethical Investment?

Ethical investments are business ventures that positively impact the environment while making a profit. Ethical investors can engage in entrepreneurship without sacrificing their moral, social, and religious principles. They are driven by the urge to do more than just make a profit and want to impact the world positively.

Ethical investments started as an informal industry, but several investment firms now offer ethical and sustainable investment solutions. Some of the ethical investment options include:•    Impact investing•    Socially responsible investing•    Environment, social, and governance factors (ESG)•    Sustainable investing

Women Favor Ethical Investments

Research indicates that women are more conscious of ethical investments than men. Over 80% of the female respondents stated that this was an important factor when making investment decisions compared to 72% of the men.

Moreover, 18% of the women look for ESG stocks compared to 11% of the men. At the same time, 34% of the men are motivated by a return on investment with no restrictions compared to just 14% of the women.

While women lag behind men in overall investment trends, women tend to be progressive investors. Female investors prefer to invest in responsible companies with a good reputation for being socially responsible and environmentally conscientious. This implies that ethical investments provide an enticing opportunity for female investors.

Ethical Investment Options

There are several ethical investment products in the UK, but in most cases, investors have to choose between buying shares or investing in funds.

Ethical Stocks

You can create a portfolio of ethical shares and bonds that suit your values and beliefs. However, it requires a lot of hard work to discern their credentials and track their performance.

Investment Funds

You can invest in an ‘ethical’ fund where a team of experts will select companies based on a set of criteria. We can recommend a portfolio of such funds and have tools to allow us to filter funds based on your specific views.

Ethical ETFs

Exchange-traded funds (ETFs) use an automated system of picking stocks and buying and selling investments. Ethical ETFs filter out companies that engage in unethical practices such as weapons and trade in conflict minerals.

How to Choose Ethical Investments

Most people view ethical investments as second-rate investments where investors have to compromise on growth and profitability. However, this is a misconception as several ethical funds consistently outperform their non-ethical peers. When selecting ethical investments, look out for:•    funds with a clear investment strategy•    the experience and track record of the main fund manager•    how the parent group views this type of investment

How Do Ethical Investments Perform?

Ethical investors often exclude investments in firms that deal with unsustainable products such as fossil fuels and unethical minerals. This reduces the risk of volatility and fluctuations associated with the trade of commodities such as oil, gas, and certain metals.

This means some ethical funds have the potential to outperform unethical funds. Moreover, most ethical funds help clients create a balanced portfolio that protects investors from downturns in some sectors.

Conclusion

There are so many ways you can use your investment choices to make an ethical, environmental, and political standpoint. The fact that these funds are making as good if not better returns (in many cases) than the more traditional types of investments makes sense to at least consider this investment strategy within your portfolio.

If you would like to discuss your current investments and how to re-align your portfolio over a ‘ fairtrade’ coffee, please feel free to contact Claire by sending an email to clm@fhmanning.co.uk.

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