It's time to discuss an increasingly vital topic — ethical investing. Ethical investing is a strategy where an investor chooses investments based on ethics instead of profit. 
It isn’t a case of investing solely because a company is tying itself to trees in the Amazon but has no sustainable business model. 
It’s a combination of them doing the right thing and being able to turn over a profit, too; otherwise, the investment would be pointless. Let's take a closer look at this. 

What is ethical investing 

In Lilil more detail, ethical investing is a type of investment that puts industries that have their main focus on positive societal impact and renewable energy as the main type of company to invest in. 

With a rise in ESG funds, ethical investments are becoming increasingly common. 

Ethical investing shares many similarities with sustainable investing, and both share the common goal of driving investment toward a brighter future. 
We will jump into exactly what constitutes ethical investing and will also break down what ESG stands for and how it applies to modern-day investing. 

Types of ethical investing

There are 5 main types of ethical investing: 

1. Socially responsible 

This is an investment that looks to weigh up not only the profit but the good that comes to the environment and society due to the investment. 

2. Sustainable

Sustainable investing is a concept ensuring important societal changes are financed by the correct investments. 
It also looks to establish that businesses have an eye on things like the environment.

3. Impact

Impact investing is any investment made into companies, organizations, and funds with the objective being to inspire a beneficial impact on society or the environment as well as financial gain.

4. Moral

This is when the morals of the company you’re investing in are the spine of your investment strategy. 
You spend time and resources ensuring that their business model and moral standpoint are all ethical.

5. ESG

(Environmental, Social & Governance, don’t worry, this has its own section a bit further on).

Ethical investment is a crucial component of the investment world as you’re putting your money into causes and businesses you truly care about. 
If they succeed, you succeed, and more money is likely to flow into these industries that value such importance in many key areas of society.

Ethical investing stocks

Several stocks are available on the market that places a key emphasis on ethics. One important thing to look out for when investing in companies. 
For this reason, is that they aren’t held by a larger holding company that has morals that you mightn’t necessarily disagree with. 

One example of this would be Coca-Cola. We aren’t suggesting for a minute that they have engaged in unethical practices over the years. 
Still, if you believed they had and didn’t want to invest in them for this reason and opted to invest in Fanta or Sprite, you’d consider yourself doing good in the world. 
However, upon closer research, Coca-Cola owns all 3 of these brands. So if you’re investing in one, you’re essentially investing in the other two.

other investments that might interest you are sustainable investing, learn all about it by downloading our app now.

What else should I consider when investing ethically?

Depending on what you consider important societal or environmental factors, this could have a wide-ranging impact on your investments. 
Suppose you believe that plant-based foods are the way to a more ethical and sustainable societal model. 

In that case, there are several companies you can look to invest in that put their primary focus on creating products where no animals are harmed. 

On the other hand, if you consider renewable energy to be the most pivotal factor, you may want to invest in companies such as Tesla and place a huge emphasis on a future that contains vehicles that aren’t powered by fossil fuels. 

If you have decided but want to continue monitoring how your investment stays ethical, you must consider several factors. 

1. Do employees hold the same views as you? - Some companies are good at putting on a good PR front, but behind closed doors, it may be a different story. 
   Employees are usually one of the best indicators of a company’s ethics behind closed doors.
2. Stay posted on any breaches - Stay up to date with news reports that focus on breaches or big stories emerging from the company where your funds are placed.
3. Keep track of the company - When a company is publicly listed on a stock exchange, it will often divulge information regarding its ethical viewpoints and audit and expenditure. 
   You can continue to monitor these things even, after your investment to ensure they maintain these standards.
4. Assess the environmental, social and corporate governance (ESG) score - this is usually issued online by agencies and reflects how well a company operates on the key components regarding ethics and sustainability.
5. Keep an eye out for catchphrases or buzzwords - These will usually appear in advertisements or company reports. 
   They may seem to agree with your standpoint, but once you dive into it, that mightn’t be the case. 
   One big example is that “carbon net zero” and “carbon neutral” are two different things. 

What is the difference between ESG and ethical investing?

ESG and ethical investing are two parts of the same story, but they are different in some ways. 
ESG tackles three key things - environmental, social and governance. Ethical investing covers the term as a whole instead of one trio of defining criteria. 

1. Environmental — This includes companies developing clean technology and looking to bring their carbon footprint down to zero.
2. Social — Reducing activities that harm society, like gambling and poverty. It also includes championing human rights, inclusivity and gender equality.
3. Governance — such as being anti-corruption, promoting healthy employee relations, or institutional transparency. Transparency includes things such as political donations and openness to shareholders about the direction of the company.

Is ethical investing profitable?

Ethical investing positively affects society and can return some serious profits when done correctly. 
By putting your money into organizations whose values and ethics coincide with yours, you can rest easy knowing you are benefitting a company that helps you whilst making a return.

Ethical investing will continue to grow as the market receives incentives from central governments.

if you liked ethical investing, you might also like social impact investing.

#advice_by_amana: Just because a company is ethical it doesn’t mean it’s not profitable, some of the most profitable companies are taking an ethical approach.
You could choose a “green” company or a charitable company and still make a considerable profit.

Bottom line

Ethical investing not only helps businesses get the money they need to grow and fund their CSR (corporate social responsibility) programs. 
But it also gives investors the power to shape how businesses work and what they do based on their own ethics and values.

want to learn what are indexes? read our blog.

If you want to learn more about trading and investment with amana, review our guide on investing.

 Continue reading and devolving your knowledge regarding trading markets with amana learning center, read a few articles in our blog, or watch some videos from our video library.

Move forward with steady steps towards increasing your knowledge, and when you feel that you have gained enough experience download the amana app. And start your investment journey with us.