Ethical Investing: What it is, how we do it, and why it matters

Ethical investing has become a buzz phrase in the finance world.

As you might expect, not everyone who talks about it is really doing it though. Look at some of the worst environmental offenders in the world – and you’ll see their websites are plastered with terms like ‘sustainability’ and ‘net zero’.

Read on to get our take on ethical investing; what it is, how we do it, and why it matters.  

‍

What is Ethical Investing?

‍There’s really no central, universally accepted standard for this. There are some filters, guidelines and benchmarks, but these are sufficiently loose and ambiguous as to be almost worthless. The central concept of ethical investing, to us, is sustainability.  

“Sustainability is not a slogan. It’s a warcry…”

By definition, if something is sustainable, it means you can keep doing it. We like things you can keep doing. We especially like them if they represent the advancement of a sustainability outcome in and of themselves, or are strongly moving the needle towards one. Sustainability is not a slogan. It’s a warcry to all people who have capital to allocate. It may seem cynical, but the reality is that we live in a world in which our money changes things far more surely than our votes.

If the question is: “how can I contribute to positive change, while also growing my assets over time?”, ethical investing is the answer.

‍

How we do it.

Enshrined on our website is the core of our approach: “…we take care to select investments which we believe foster economic progress, sound environmental stewardship, and/or gender diversity…”

We navigate the investible universe by taking what’s called a thematic approach. In practical terms, this means that we invest for outcomes. For example, if a particular industry sector is investing heavily in areas which, in our opinion, will have long term benefits for the planet of its people, we will consider investing in that sector. By the same token, if there is a particular industry sector which we believe is headed in the wrong direction, we will try to avoid it. This is also sometimes referred to as impact investing.

Thematics are extremely important when it comes to the long term picture, including the timeframe over which you, as an investor, are accumulating assets. Take technology for example. We are still in the pre-exponential growth phase for many technologies and the businesses built around them (even though many of these had a dire 12 months) – and we are on the cusp of exponential growth for others. The long term picture for many of these businesses will be the exact opposite of what one might expect to see for companies who focus exclusively on fossil fuels. Along that trajectory, these growing companies are bringing bold new ideas into the world; creating new opportunities and solving old problems.

Our approach is not perfect. Nobody’s is. But ethics and sustainability are at the very core of how we do what we do. Nobody who works with Afinitiv has to commute – and for as long as I am personally responsible for it, we will never have an office in a skyscraper. We will never receive a bonus for pushing any particular investment product over another – and there are no quotas. We consume the minimum amount of time and resources by stripping away all that is unnecessary and wasteful in delivering our service to you.  

Ethical investing isn’t simply how capital is externally allocated.

It starts from within - and grows from there.  

‍

Why we do it.

It’s no secret that at this point in the history of our species and of our planet, we either need to make some radical changes to what we’re doing, or face consequences which are, frankly, unimaginable. This isn’t limited to the natural world; it also encompasses economic equality too. When systems, both natural and human-made, reach a point of high imbalance have a strong historical tendency to fall apart. When they do, they rarely do so gracefully.

There is a threshold below which shrinking biodiversity will cause an ecosystem to collapse.

There is a threshold above which economic inequality will lead to revolution, or civil war.

We believe it is important to work towards mitigating the risk of both.

‍

If you feel that ethical investing is right for you, now might be the right time to make a start. You can join us here.

‍