Do you want to create a positive impact on the world with your investments? Ethical investing allows you to do just that. Whether you care about sustainability, social justice, or ethical governance, aligning your investments with your values can be rewarding both conscientiously and financially. 

A financial advisor can show you how socially responsible investing works. Let's explore how ethical advising works and why it matters.

Why Ethical Investing Matters

What is ethical investing? Simply put, it's about matching your financial decisions with your values. If you care about the environment, human rights, or corporate honesty, you wouldn't want your investments to back companies that contradict these values. Ethical investing allows you to contribute to positive change while potentially gaining from financial returns.

Ethical investing, also known as socially responsible investing (SRI) or ESG investing (environmental, social, and governance), is an investment strategy that considers financial gains and social impact. Unlike traditional investing, which prioritizes profit, ethical investing promotes a positive societal impact.

The Role of Financial Advisors in Ethical Investing

Ethical investing can be complex and time-consuming, and that's where financial advisors come in. They can help you understand the options, identify suitable investments, and build a portfolio that aligns with your values.

Understanding Your Values

The first step in ethical investing is determining what is most important to you. Are you worried about climate change? Do you want to back companies with fair labor practices? Your financial advisor can assist you in finding investments that align with your values.

Doing the Homework

Not everyone has the time or expertise to thoroughly research every company they invest in. Financial advisors can access the tools and resources needed to evaluate companies based on ESG criteria. They can help you avoid investing in companies involved in activities contradictory to your values and direct your capital toward those making a positive impact.

Building Your Ethical Portfolio

Once your values are clear, your advisor will assist you in creating an ethical investment portfolio. This will involve selecting a mix of investments such as stocks, bonds, and mutual funds that align with your values and financial goals. They’ll ensure your portfolio is diversified and balanced to manage risk while supporting your ethical standards.

Practical Steps to Align Your Investments with Your Values

Ethical investing may seem overwhelming. Can you really align your values and investments without sacrificing one or the other? 

Following a few systematic steps, you can construct a portfolio that fulfills your financial objectives and aligns with your values.

1. Set Clear Ethical Criteria

Start by defining what ethical investing means to you. Consider whether you want to avoid industries such as fossil fuels, gambling, or tobacco or prefer to support sectors like renewable energy, education, or healthcare. Your financial advisor can assist you in clarifying these priorities.

2. Use ESG Ratings

Financial advisors often use ESG ratings to assess the ethical impact of companies. These ratings consider a company’s environmental policies, social contributions, and governance practices. For instance, environmental ratings may include carbon footprint and the use of clean technology, while governance is scored on issues like executive compensation and business ethics. Higher ESG scores or ratings generally indicate better ethical practices.

3. Choose the Right Funds

Ethical mutual funds or exchange-traded funds (ETFs) are great options for ethical investors. Socially conscious funds typically pool money from many investors to buy a diversified portfolio of thoroughly screened companies. These funds can have a narrow focus like environmental impact or can include a variety of companies with high ESG scores. An ESG fund can also specifically exclude certain industries like adult entertainment and weapons manufacturing. Your advisor can help you choose a fund that matches your ethical criteria and financial goals.

4. Monitor and Adjust

Ethical investing isn’t a one-time setup. Companies and industries evolve and so do your values, so it’s essential to review your investments regularly. Your financial advisor can help you stay on track, making adjustments to ensure your portfolio continues to align with your values.

Why Ethical Investing is Worth It

One of the greatest benefits of ethical investing is the sense of satisfaction that comes from knowing your money is supporting causes you believe in, such as promoting environmental sustainability, advancing social justice, or encouraging ethical corporate governance. Ethical investing allows you to align your financial decisions with your values.

Contrary to some misconceptions, investing ethically doesn't mean sacrificing returns. Key studies have shown that companies with strong ESG practices often perform well financially. They tend to be more resilient, attract loyal customers, and avoid scandals, which can lead to better performance over time.

Ethical investing allows you to use your financial influence to support companies making a positive impact, creating a ripple effect of positive change. Ethical investing will enable you to enjoy financial returns while knowing you're contributing to a better future.

The Aligned Perspective: Your Portfolio and Your Values

Whether you’re new to investing or looking to make your portfolio more values-driven, consider the benefits of ethical investing. With the guidance of a knowledgeable financial advisor, you can cut through the complexities of ethical investing. From setting clear criteria to selecting the right funds and monitoring your investments your advisor will be there to help you every step of the way, helping to ensure your investments grow and contribute to a better world. Ready to get started?